Also in this playlist...
This transcript is automatically generated
-- James -- and with the American Bankers Association.
Before we get to the link between -- printing and stocks going up I got to see a smile on your face today.
Because the Dallas strayed out decent unemployment are you guys gonna start making loans again.
Well we're happy to make loans in fact banks are very aggressive in trying to and make loans the issue really -- -- businesses.
So uncertain about their future.
That they're not quite as willing to -- so we're quite anxious to meet the loan demand we just need -- -- demand.
Okay here's something which we've been wondering about -- long time and I've never had it properly explained to me.
Ben Bernanke prints money he buys what 85 billion dollars a month and treasury debt and mortgage backed securities.
Tell me I mean -- you're a -- explain to me how does that money go from Ben printing into the stock market given the change.
Well that McCain I think is actually fairly simple that what the Fed is doing is it is buying so that means it is bringing in those securities it throws that in its vault.
And it puts 85 billion in cash out on the market and because it's pushed the price said treasuries up in the interest rates down.
It means that those are not good investment so wide investors do whether it's hedge funds pension plans individual investor -- look for other better alternatives.
And that means riskier alternatives and that often means.
Stocks when it buys when the Federal Reserve buys these mortgage backed securities.
Forty billion a month -- -- who gets the money who gets that forty billion.
Well -- whoever held those securities write those securities are out there mortgage backed securities are in the market it's a pretty big market.
Out there hopefully that will grow over time so those securities are issued in the market the Fed wants to pull them off throw that in the -- And replace that with cash and now that cash has to go somewhere and it typically goes into higher risk types of assets.
-- so is that that's a legitimate thing to say that.
-- prints stocks go up because all their investments like bonds for example they return you virtually nothing so investors go to stocks because that's where the -- -- is.
Is it that simple that's how it works.
Well I had me.
I think it actually and -- the simplest terms that's how it works now what are they trying to do right they're trying to keep interest rates low that -- businesses.
To borrow more expand -- their return on investment is better.
So they're encouraging that they're trying to get the wealth.
And have the wealth effect -- when people feel wealthier is the stock market goes up and it's going up today as we as we know.
Then people are more interested to body goods and services that they might give.
In other circumstances.
They're trying to get money out to not only expand but -- get consumers more interested in buying build that confidence back.
Hi James -- will we thank you very much indeed for joining us.
We wanted to get a simple explanation about this printing money in the stock market you get it to us we appreciate our parties register thank you west.
Filter by section