As remarked elsewhere now and again, but not quite as succinctly as here:
So what did QE achieve once we look at the money flows?
This policy has been replenishing the banks’ coffers though not quite in the Mexican and Savings and Loan manner. Instead of printing money to fulfill nominal commitments, the government and the Fed have been taking toxic credits away from the financial institutions’ balance sheets. The government and the Fed have been “validating” the lousy credit already created.
And if that’s not enough, banks can borrow from the Fed at extremely low rates and buy Treasuries. The generous spread between these rates is allowing them to record the profits that are rebuilding their balance sheets with no risk or effort.
