Bernanke was well qualified for his job.
The Fed is buying Treasuries from banks at competitive prices and is doing so to encourage more bank lending. Saying that the Fed is directing this buying solely to Goldman Sachs is absurd. The Fed conducts such Treasury open market operations through an approved list of 18 primary dealers, and Goldman is one of the 18 dealers operating in a highly competitive environment. Goldman bashing has been going on for a long time.
Interestingly, there hasn’t been much questioning of the background and agenda of the person behind this fact-challenged YouTube video, who in some articles is referred to as a “30-year-old real estate manager.” He has no discernible background or expertise in the subject matter discussed in the video, which helps explain why nearly every statement in the video is wrong.
In various speeches and selected interviews, former Fed Chairman Bernanke has explained QE. Here’s one fairly plain English explanation that Bernanke gave during the height of the credit crisis (Note: “Central bank” means the Federal Reserve):
Quantitative easing can be thought of as an expansion of the central bank’s balance sheet with no intentional change in its composition. That is, the central bank undertakes more open market operations with the objective of expanding bank reserve balances, which the banking system should then use to make new loans and buy additional securities. However, when credit spreads are very wide, as they are at present, and the credit markets are quite dysfunctional, it becomes less likely that new loans and additional securities purchases will result from increasing bank reserve balances.
In contrast, credit easing focuses on the mix of loans and securities that the central bank holds as assets on its balance sheet as a means to reduce credit spreads and improve the functioning of private credit markets. The ultimate objective is improvement in the credit conditions faced by households and businesses. In this respect, the Federal Reserve has focused on improving functioning in the credit markets that are severely disrupted and that are key sources of funding for financial firms, nonfinancial firms, and households.
Book 2
Investing in Your 20s and 30s
Contents at a Glance
1 Chapter 1: Using Investments to Accomplish Your Goals Setting and Prioritizing Your Shorter-Term Goals Investing in Retirement Accounts
2 Chapter 2: Minimizing Your Taxes When Investing Understanding Investment Taxes Reducing Your Taxes When Selling Investments
3 Chapter 3: Laying Out Your Financial Plans First Priorities: Paying Off High-Cost Debt and Building a Safety Reserve What about Paying Down Other Debts? Sorting Out Your Financial Plans Knowing the Impact of Investing for College Costs Securing Proper Insurance
4 Chapter 4: Starting Out with Bank and Credit Union Accounts Understanding FDIC Bank Insurance Investing in Banking Account and Savings Vehicles Negotiating with Bankers Feeling Secure with Your Bank Exploring Alternatives to Bank Accounts
Chapter 1
Using Investments to Accomplish Your Goals
IN THIS CHAPTER
Saving and investing money can make you feel good and in control. Ultimately, most folks are investing money to accomplish particular goals. Saving and investing for a car purchase, expenses for higher education, a home purchase, new furniture, or a vacation are typical short-term goals. You can also invest toward longer-term goals, such as your financial independence or retirement decades in the future.
This chapter discusses how you can use investments to accomplish common shorter- and longer-term goals.
Setting and Prioritizing Your Shorter-Term Goals
Unless you earn really big bucks or expect to have a large family inheritance to tap, your personal and financial desires will probably outstrip your resources. Thus, you must prioritize your goals.
One of the biggest mistakes people make is rushing into a financial decision without considering what’s really important to them. Because many people get caught up in the responsibilities of their daily lives, they don’t take time for reflection often because they feel that they lack the time. Take that time, because people who identify their goals and then work toward them, which often requires changing some habits, are far more likely to accomplish something significant.
This section discusses common “shorter-term” financial goals — such as establishing an emergency reserve, making major purchases, owning a home, and starting a small business — and how to work toward them. Accomplishing such goals almost always requires saving money.
Accumulating a rainy-day fund
The future is unpredictable. Take the uncertainty simply surrounding your job: You could lose your job, or you may want to leave it.
Consider what happened in 2020 with the COVID-19 pandemic and the unexpected and lengthy government-mandated shutdowns in some parts of the country, which led to large layoffs in particular industries like restaurants, retail, and travel-related businesses. While the 2020 recession was unusual in many respects, recessions aren’t unusual, and even when the overall economy is growing, some employers let employees go. Suppose an elderly relative, for example, needs some assistance for a period of time? You don’t need to be negative or a pessimist, but problems happen, and sometimes financial downsides can come with them.
Because you don’t know what the future holds, preparing for the unexpected is financially wise. Enter the emergency or rainy-day fund.
