Summary of Christopher Leonard's The Lords of Easy Money , livre ebook

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35 pages

English

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Please note: This is a companion version & not the original book.
Sample Book Insights:
#1 The Federal Reserve System is the only institution in the world that can create American dollars at will. Because he was a senior official at the Federal Reserve, Thomas Hoenig had to think about money all the time. He had to think about it as a system to be managed and managed just right, or else terrible things might happen.
#2 For a year, Hoenig had been voting no. If you tallied his votes during 2010, the tally would read: no, no, no, no, no, and no. His dissents had become expected, but they were also startling if you considered Tom Hoenig’s character. He was a rule-follower.
#3 The American financial system had collapsed in late 2008, after the investment bank Lehman Brothers collapsed. The world of central banking was neatly divided into two eras: pre-GFC and post-GFC. The GFC itself was apocalyptic.
#4 The Fed is like a group of engineers in the control room of a nuclear power plant. They heat up the reactor, by cutting rates, when more power is needed. And they cool down the reactor, by raising rates, when conditions are getting too hot.

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Publié par	Everest Media LLC
Date de parution	22 mars 2022
Nombre de lectures	0
EAN13	9781669357360
Langue	English
Poids de l'ouvrage	1 Mo

Informations légales : prix de location à la page 0,0150€. Cette information est donnée uniquement à titre indicatif conformément à la législation en vigueur.

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Insights on Christopher Leonard's The Lords of Easy Money
Contents Insights from Chapter 1 Insights from Chapter 2 Insights from Chapter 3
Insights from Chapter 1

#1

The Federal Reserve System is the only institution in the world that can create American dollars at will. Because he was a senior official at the Federal Reserve, Thomas Hoenig had to think about money all the time. He had to think about it as a system to be managed and managed just right, or else terrible things might happen.

#2

For a year, Hoenig had been voting no. If you tallied his votes during 2010, the tally would read: no, no, no, no, no, and no. His dissents had become expected, but they were also startling if you considered Tom Hoenig’s character. He was a rule-follower.

#3

The American financial system had collapsed in late 2008, after the investment bank Lehman Brothers collapsed. The world of central banking was neatly divided into two eras: pre-GFC and post-GFC. The GFC itself was apocalyptic.

#4

The Fed is like a group of engineers in the control room of a nuclear power plant. They heat up the reactor, by cutting rates, when more power is needed. And they cool down the reactor, by raising rates, when conditions are getting too hot.

#5

The Fed was going to vote on a radical experiment in 2010 called quantitative easing, which would essentially take interest rates negative for the first time and push even more money into the banking system.

#6

Hoenig was very critical of quantitative easing, as he knew that it would create historically huge amounts of money that would be delivered first to the big banks on Wall Street. He believed that this money would widen the gap between the very rich and everyone else.

#7

The Fed sent vehicles to transport the regional bank presidents as a group to its headquarters building. The presidents all spoke the same language and shared the same burden. Hoenig had worked around people like this his entire career, but his position within the FOMC had grown increasingly strained with each no vote he cast.

#8

The Fed was beginning to feel the pressure from Hoenig’s dissents, as the decisions it was making were becoming more and more significant. The public had lost faith in America’s democratic institutions, and were turning to the nondemocratic institutions of the Fed and the Supreme Court to solve their problems.

#9

The dissents of Thomas Hoenig, the longest-serving member of the Fed’s Board of Governors, were a large reason the Fed was able to act so quickly. He was well liked in the Fed’s cloistered world, but his peers spoke to him with unease.

#10

The Federal Reserve, however, has a different political system within it. The debate between hawks and doves is usually discussed in terms of inflation, which is when prices rise quickly and the value of a currency falls. If the Fed is seen as a team of nuclear engineers who supervise economic growth, then inflation is seen as the meltdown to be avoided at all costs.

#11

The hawk-and-dove motif was started by Paul Volcker, and it stuck. It was generally accepted that doves were compassionate and wanted to help the economy and working people, while hawks were harsh and severe and wanted to stop the Fed from helping people.

#12

The allocative effect is when 0 percent interest rates create winners and losers. When interest rates hit zero, and money becomes cheap, it pushes banks to make riskier loans.

#13

When the Fed pushed all that money out onto the yield curve, it led to an asset bubble.

#14

The Eccles Building was the home of the Federal Reserve, and was always filled with the hushed atmosphere of fine art and carpeted hallways. The boardroom was the most famous feature of the Eccles Building, and the most famous feature of the boardroom was the enormous ovoid table at its center.

#15

As the economy continued to stagnate in 2010, Bernanke had the opportunity to define his legacy. He was, in many ways, perfectly suited for the job. As an academic, he had focused on the Great Depression and written extensively about ways in which a new depression might be averted.

#16

In August 2010, Bernanke began campaigning for the use of his greatest innovation, quantitative easing. The Fed would buy bonds and debt, which would help lower interest rates and stimulate the economy when no one else would.

#17

The basic mechanics of quantitative easing are actually quite simple. The Fed would buy trillions of dollars worth of assets from primary dealers with newly created money. The aim was to inject that money into the banking system, at a time when banks had almost no incentive to save it.

#18

Inside the FOMC, there was much debate about whether or not to implement quantitative easing. While Bernanke argued for it, several members had strong objections, particularly Hoenig.

#19

The Fed’s own research on quantitative easing was surprisingly discouraging. If the Fed pumped $600 billion into the banking system, it was expected to cut the unemployment rate by just. 03 percent. While that wasn’t much, it was something.

#20

It was widely believed that it would be disastrous if three or four FOMC members voted against any given plan. However, Bernanke didn’t face this risk in November 2010 because the committee had twelve members, but only five seats were available for regional bank presidents.

#21

The final dissenter was Hoenig, who warned that the Fed might be laying the groundwork for another financial crisis, even if the timing and cause of that crisis could not be predicted. He also said that the Fed might compromise its independence because it would be purchasing so much government debt.

#22

After the vote, Hoenig dissented and gave an interview the next day to Sudeep Reddy of The Wall Street Journal in which he criticized the committee’s action. He had seen firsthand how much devastation the Fed could cause when it got things wrong.

#23

Tom Hoenig, who later became a politician, was given a clipboard and sent to the back room of his father’s plumbing business to take inventory when he was nine years old. He decided to go to college, and ended up studying economics.

#24

Tom Hoenig, after graduating from college, was drafted into the army. He was assigned to an artillery unit, which was located farther from the front lines than the infantry units where soldiers fought the Viet Cong.

#25

During the Vietnam War, Hoenig was a fire direction control specialist, which meant he was in charge of firing heavy artillery.

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