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Idiotic Proposals for Fed to Give Away Money

IMG Auteur
Mish
Global Economic Analysis
Published : September 19th, 2014
268 words - Reading time : 0 - 1 minutes
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Category : Opinions and Analysis

A Fiscal Times, Yahoo Finance article by by John Grgurich claims that Instead of QE, Fed Could Have Given $56,000 to Every Household in America .

Grgurich formulated his article after reading "an intriguing piece just published in Foreign Affairs, Brown University political economist Mark Blyth and London-based hedge fund manager Eric Lonergan argue the Fed could have done better by pursuing a far different type of grand policy experiment."

The "intriguing piece" is Print Less but Transfer More, Why Central Banks Should Give Money Directly to the People.

Sheer Idiocy

  • First, the Fed cannot give away money, it can only make money available for lending. 
  • Second, the idea that the Fed should give away money is ludicrous, even it the Fed could. 
  • Third, Grgurich is in severe need of math lessons as to what actually transpired.  

The Math

According to the census department the number of US households is 115,226,802.

Base Money Supply has gone up from $848 billion at the start of 2008 to $4.150 Trillion today. That is an increase of roughly $3.3 trillion.

An increase in money supply of $3.3 trillion is not the same thing as a gift of $3.3 trillion. At most, banks made 0.25% interest (free money) on excess reserves parked at the Fed.

The actual amount of excess reserves is $2.7 trillion.

0.25% of $2.7 trillion is $6.75 billion. That is the amount the Fed effectively gives banks, per year. Spread among 115,226,802 households the gift would be $58.58 per year (less actually because excess reserves grew over time they did not suddenly hit $2.7 trillion).

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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IMG Auteur
Mish 13 abonnés
Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. He writes a global economics blog which has commentary 5-7 times a week. He also writes for the Daily Reckoning, Whiskey & Gunpowder, and has over 80 magazine and book cover credits. Visit http://www.sitkapacific.com
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