Hey everyone thanks for joining me. Today is a special day for me. First off, I’ll be talking about something that I’ll really have to research…nothing new, but I love to learn! Also, I’ll be doing my first roast. Today I’ll be introducing you to a pretty interesting guy that rarely has nice things to say…at least on his blog.
Introducing Greg McFarlane from Control Your Cash!
Greg has done something new with the personal finance blog industry. In an industry filled with care and constructive criticism for your fellow blogger, Greg has brought cruel and unusual tactics. That’s right, he’s the one D&^% head that every circle needs to have. His blog is called Control Your Cash. It’s a place where you can submit your article for his Carnival of Wealth, but it better be good or he’ll tear you a new one!
OK, So I’m Not a Good Roaster
OK, so my first roast is an epic fail. The reality is, Greg has done something unique. He’s become popular for giving brutal honesty and going beyond the cusp of normality in doing so. Unfortunately, many people take this the wrong way…I’ve actually been advised not to submit my articles to his carnival. I still do it anyway, even when he tears me apart, I learn from the experience. And, to tell the truth, behind his blog, Greg is a really nice guy.
I remember I first contacted him a little angry about how he portrayed my writing in his carnival. He responded in a way I didn’t expect. He responded with tips and advice. The next week I wrote an article the he seemed to have loved and showed that in his next carnival. So, if you’ve been torn apart by the Control Your Cash Carnival of Wealth, don’t let it get to you, its business baby!
Now To the Gist of the Post
In the last carnival, I mentioned the topic of the Federal stimulus failing. Here’s how Greg reacted…
“Joshua Rodriguez at CNA Finance discovered thin air, the substance that the Federal Reserve creates “quantitative easing” out of. And can we stop using euphemisms? QE is the name of the process under which the Fed trades cash reserves to banks for bonds. The Fed isn’t printing money so much as it’s creating liquidity. The problem is, it isn’t working. You know, this really warrants a post of its own rather a hastily scribbled paragraph in what’s supposed to be a summary of Joshua’s post.”
Believe it or not, this is a pretty decent response from the guy. By the way Greg, “Joshua Rodriguez at CNA Finance discovered thin air, the substance that the Federal Reserve creates “quantitative easing” out of.” is filled with grammatical errors. Throw it in Word; the entire sentence is a green line. However, Greg is right; this is a topic that does deserve a full post.
What Is Quantitative Easing?
The general idea of Quantitative Easing is that the Feds are printing extra bank notes to increase the supply of money. However, that’s not exactly how it works, and to be fair to Greg, euphemisms really shouldn’t be used when talking about these things because they lead to overwhelming misunderstandings.
Quantitative Easing is an unusual monetary policy that goes into effect when short term market interest rates are too close to zero. Under this policy the Central Bank purchases government and other securities in order to flood the market with capital and promote lending and liquidity. In doing so, the money supply is increased through the market, not through an increase in printed bank notes. The entire process is designed to spur economic growth.
Why I Said It Failed…And Stand By That Statement.
Quantitative Easing didn’t fail because the markets weren’t doing better, or people couldn’t get loans. QE failed because of how it was carried out, and the affects it had on working consumers. The truth is most of your everyday consumers didn’t even know quantitative easing was happening. We were told that the economy was getting better, we were told that there were more jobs available, we were told all kinds of things. However, when we looked around none of that seemed to be true.
Why We Were Told These Things
Spending is the single most important factor for the economy. If consumers aren’t spending, businesses go under. By telling the average consumer that the economy was getting better, the idea is that it would promote spending. As more and more people started spending, companies would start bringing in more profits, in the end the economic recovery would be in sight. The only problem is, that didn’t happen!
The Psychological Tolle QE Took On Consumers
I’m no psychologist, so take the following as personal theory. Although consumers were being told things were getting better, they didn’t feel it. The bottom line is, for the vast majority of consumers, things weren’t getting better by any means. So, instead of these statements making people feel better, it ended up leading many people to the “Is this as good as it gets?” mindset. Under this mindset tons of things happen, none of them being the spending that the economy needed.
The Effects Of the “Is This As Good As It Gets” Mindset
Instead of spending more and more, consumers started to really think about their future. Will they have a job tomorrow? Will they be able to pay their bills if not? These were real questions that were being asked as the economy was “getting better”. This mindset leads people to saving their money rather than spending it. In an effort to save more money, many people started changing their budgets and entire spending habits.
But Didn’t QE Start Slowing Down Because The Economy Has Recovered?
That’s what some are saying, but I’m not falling for it. Another theory is that QE had the reverse effect, the exact effect that I’m explaining. As the Central Bank started to notice, they decided to ease their easing program.
What Do You Think?
Is Greg a D%^& or what? Also, do you think that QE is being slowed because it worked or because the Central Bank realized it failed?