Only thing I can think of is perhaps they're making it easier for people to buy things on credit by lowering interest rates....but I don't know anything about credit easing

I think the difference here is that the interest rates are lower so that it's easier for the debt-riddled Europeans to buy the bonds of the debt-riddled Americans, British, Japanese, etc. With QE, it was the Fed buying its own bonds, this is making it easier for others to buy those bonds.

At least, that's what I gleamed from an article this morning. I've given up trying to understand the financial legerdemain in the eurocrisis.

My thinking so far is that money is injected not by buying government bonds but by buying corporate debt. That's what the Term Auction Facility and Corporate Paper whatever-it's-called facility seem to do. So it seems more targeted than regular QE. I could be wrong.

Well, whatever it is it won't work. Europeans have the option to either be economically annexed to Germany and be ruled from Brussels, or have the whole common currency shatter and live with inflation and economic chaos with New Drachmas, New Lira, even New Francs in their pockets. What a mess, and what a shame.

I wasn't talking about Europe, but ok. Europe doesn't believe in this kind of Keynesian policy, that's their problem. You won't see Germany do Quantitative Easing, ever. The history of inflation is too traumatic.

Well, the Fed and other central banks didn't do this just on a whim. It's a desperate attempt to save the euro or, more likely, buy time to come up with a way to keep the fall of Europe from bringing the entirety of the world economy with it.

Germany's already killed some of its sacred economic cows in this crisis. I won't pretend to know what the Germans will do, but it wouldn't surprise me if the German printing presses did get going at some point. The collapse of the euro could easily make both periods of German hyperinflation look like minor rough patches.

Quantitative easing is when the Fed expands its balance sheet by purchasing treasuries or other government bonds. This is what the Fed did in November 2010. Credit easing is when the Fed expands its balance sheet by purchasing private sector assets. This is what Bernanke did back during the financial crisis when the Fed bought up a whole bunch of mortgage backed securities.

Happy to help! I wish there was more discussion of finance and economics on here.

Thanks Frank, glad to get confirmation on that.

Ah I see what Invictus is referring to now. The Fed is apparently involved in some plan to pump money into Europe. Interesting.

What does expanding a balance sheet mean? And if it is what I assume it can't it only happen by issue debt or equity, not purchasing it?

Also, if you are right about Germany not wanting to increase the money supply dramatically because they are scarred by the hyperinflation of the 20s, they are still able to do certain types of quantitative easing that can affect interest rate term structures without expanding the balance sheet. For example, the Fed earlier this fall did something called Operation Twist. The short term interest rates were already so low that they decided to stimulate the economy by flattening the yield curve. They bought longer term securities at the same time as selling the same amount of shorter term securities. This way, the balance sheet is unchanged but longer term rates are pushed down. That's one way that Germany could do "Keynesian policy" without too much inflationary pressure. .

When the fed "prints money", it basically gives credits to banks which can be converted into cash. These credits are put on the balance sheet as "notes outstanding" and counted as liabilities, so the balance sheet is expanded.They grant these credits to banks (normally), by buying treasuries from the banks. This is how the interest rates are controlled. QE is simply a massive purchase of treasuries from banks (massive expansion of the balance sheet on the liability side), as far as I can tell. It's not done to control interest rates since they're already zero. From what Frank said, Credit Easing seems to do the same thing except by buying private debt instead of government treasuries. So the balance sheet is expanded but more attention is paid to the asset side.

Does the fed even have equity or is their balance sheet just assets = liabilities?

Yeah, Putin nailed it. A balance sheet of a central bank is different from any other balance sheet since they can actually introduce more money into the economy. So they can expand their balance sheet by purchasing assets. Unlike a company or governemnt, where I guess you would need to issue debt or equity to expand the balance sheet rather than just purchase it.

Sorry didnt see your last question. Central banks can have equity. Here is the Bank of Canada's balance sheet:

http://www.bankofcanada.ca/wp-content/uploads/2011/11/statement_financial_position_311011.pdf

Over under on when Tolstoy comes into the thread?

This makes sense. Do you remember in the 90s and 2000s when Japan's interest rates had fallen so low? When they set target amounts of money in circulation did they control it in this same fashion?

I don't think the Fed is allowed to hold equity. I could be wrong.

Yes, I think that's why the Fed now wants to do Credit Easing, because the QE in Japan is said to have not worked.

I don't know anything about Japan but most central banks either set targets for inflation or just targets for interest rates. Than they try to reach these targets through open market operations. I don't think the US has an explicit inflation target but Canada.

also in case anyone is interested, here is the fed's financial statements and balance sheet. it is kind of cool to look at:

http://www.federalreserve.gov/monetarypolicy/files/BSTcombinedfinstmt2010.pdf

Japan had set the target interest to zero and couldn't go lower so they reduced target money supplies, I believe. @Putin that makes sense, this thread is way educational.

Duh on the equity thing. Forgot that the fed has tons of AIG shares.

@Frank
also in case anyone is interested, here is the fed's financial statements and balance sheet. it is kind of cool to look at:

http://www.federalreserve.gov/monetarypolicy/files/BSTcombinedfinstmt2010.pdf

I see that it is audited by our friends at Deloitte & Touche LLP 555 12th St. N.W. Suite 500 Washington, DC 20004-1207 USA.

Weren’t they involved with these guys: Taylor, Bean & Whitaker Mortgage Corp. ("TB&W")? http://mobile.bloomberg.com/news/2011-09-26/deloitte-touche-sued-for-7-6-billion-in-taylor-bean-collapse.html

I believe that they also incorporated a significant segment of the Arthur Andersen train wreck. Incidentally despite senior partners ordering the shredding of Enron documents no one has been found to carry the can. Funny that!
http://www.telegraph.co.uk/finance/2749202/Shred-Enron-papers-says-Andersen-memo.html

@Frank
also in case anyone is interested, here is the fed's financial statements and balance sheet. it is kind of cool to look at:

I wonder if you could direct me to the section of the accounts which lists the major shareholders of the organisation. I know that truth seeker/conspiracy/contrarian/sceptical theories abound on this point and it would be nice if the accounts could provide a definitive answer to this question. I believe that other company accounts routinely carry this information.

Bank of Japan issues money supply forecasts but they are not formal intermediate targets of monetary policy. That makes sense since the rigid monetarist rules for money supply (like Friedman's k-percent rule) ceased to work when the innovation in the financial sector loosened the relation between money supply and inflation rate. That was already a quarter century ago. It doesn't follow explicit inlfation targeting either though, just like FED. The difference is that FED has other issues to care about (employment) and so it makes sense to not commit too much to curtailing inflation whereas BoJ is much more independent and while it objects to inflation targeting as inflation nuttery, it is about as hawkish when it comes to economic stimuli as Bundesbank and its successor ECB. That's usually given as a reason why the QE didn't work in Japan, it was too small (mostly artificially inflated), late and weak-minded.

@largeham: Deloitte is one of the Big 4 accounting firms. They are all pretty respected but I'm sure they all have had scandals and mistakes in their pasts just because of the huge number of institutions they each audit.

Page 7 and 21 of that pdf discuss the ownership of the Fed ( note p: capital paid in). Basically, member banks (which are private) own shares of the regional feds, but these shares don't appreciate in value, can't be traded, etc. And Congress -- not the shareholding banks -- are the ones who oversee the bank. This link explains it pretty well: http://www.federalreserve.gov/faqs/about_14986.htm

For example, here is a list of the member banks for the Richmond Fed (one of the 12 branches)
http://www.richmondfed.org/banking/federal_reserve_membership/state_member_banks/index.cfm.

I meant @fulhamish, not @largeham. My bad.

I've never heard of this 'conspiracy' about the owners of the fed. It's pretty transparent. Guess I don't run around in crazypants circles enough.

@ Frank I see from your link that:
''The stock may not be sold, traded, or pledged as security for a loan; dividends are, by law, 6 percent per year.''

So would you define the Fed as a for profit company?

Also, as the suspicion must be that there are several overlapping shareholdings in the 12 branches, shouldn't this be clarified with an overall statement of the eventual ownership of large shareholdings as would be the case with other audits? Surely such a transparant and clear statement would only serve to dispel damaging rumours. Maybe I have missed it, is it there?

On the large accountancy firms as long as the audit and commercial consulting functions overlap they will be prone/tempted to act in their own interests and not those of the wider community. In my view an auditing company should just perform that function for the client and nothing else. Powerful vested interests are at work here. In the UK we have a Labour MP who is particularly lucid on this and associated points:
http://political-cleanup.org/?p=4189

PFI, anti-competitive practices etc..etc...