WHERE HAS GONE THE REVENUE GENERATED BY CENTRAL BANKS’ QUANTITATIVE EASING (QE)?

WHERE HAS GONE THE REVENUE GENERATED BY CENTRAL BANKS’ QUANTITATIVE EASING (QE)?

All citizens of the world know it. When you purchase securities (stocks or bonds) you naturally expect to receive an income from these securities. The shares pay dividends while bonds bear interests.

You're probably wondering what is the use of such basic reminders but just be a little patient and soon you will land at the right airport and on the right track.

If you were offered to you in particular to acquire shares and bonds while forgoing dividends and interest on those shares and bonds, you rightly would fall into a burning anger. It is obvious that only a mentally ill would acquire securities while forgetting to collect dividends and interest generated by these securities. And you know that in general, shareholders are very demanding in terms of dividends and generally require double-digit returns on their shares. It is also obvious to you that if you purchase securities, you will demand a return over all the period during which you have been holding such securities.

Obviously, all the world's citizens know that the Central Bank belongs to ... the State. However, the detailed FED’s shareholding for example is still not available on its website (You know, it is because there is a lot of democracy, good governance and transparency). So if the Central Bank earns income, such income rightfully belongs to the State and if it loses, the loss rightfully belongs to the State.

The basic reminders above being made, let us start to look for the runway and be courageous because you expect fierce turbulence on landing.

Due to a well-organized conspiracy of silence, none of our "global economists" has made ​​cases about the iniquity you are about to discover now.

From 2008 to 2014, the US FED massively practiced Quantitative Easing (QE) in order to revive the American economic engine as it is said. This QE consisted of a massive purchase by the FED of private company shares, government bonds and corporate bonds. Cumulative amount of such purchases? Hold thy peace; USD 6 700 billion over six years!

So during six years, the amount of shares, government bonds, corporate bonds purchased by the FED was USD 6 700 billion. The FED bought these securities from commercial banks, insurance companies and investment funds.

Let us share at this juncture a small technical detail and rest assured, it is the only one.

When the FED buys these securities from commercial banks it creates from nothing (ex-nihilo) a special money that Americans will never see nor use because it circulates only in the hands of commercial banks. This money is the “central money”. So for this type of redemption that did not cost the FED anything ( since even a basic employee of the central bank can simply click in two minutes on a computer keyboard to create “central money” ) there was no new injection of money into the American economy.

When the FED buys these securities from insurance companies or investment funds, the FED in this case actually creates new money from nothing ( ex-nihilo) and this new money actually enters into the American economy. Here again the FED has incurred no cost. FED has created from nothing the new money which is reflected in the accounts held by investment funds and insurance companies in the books of commercial banks.

Now let us begin the landing phase and let us therefore enter into the strong turbulence area.

The FED has spent nothing at all as we have seen. Its basic employee clicks on the keyboard of a computer to create both the “central money” given to banks and the new money given to insurance companies and investment funds. In return for this creation from nothing the FED became the owner of USD 6 700 billion of stocks and bonds that normally pay dividends and interest to the FED!

You have already started understanding the landing turbulence.

Assuming that the FED hit by a strong distraction (normally in neoliberal economics, shareholders require double-digit returns on their shares) has merely accepted an average annual return of just 1% on these USD 6 700 billion securities, it means that since 2008 the FED annually garners large and growing revenues which, in full capacity, amounted to USD 67 billion per year. And that income is generated by securities that have cost nothing to the FED!

Let us rejoice because the FED is in principle an institution belonging to  the United States of America (we cannot confirm this hypothesis to you because, you know, due to abundant democracy and transparency the shareholding of FED is not published even on the FED’s website) and therefore, this FED must naturally have deposited these revenues from purchased securities into the hands of a chronic debtor living in permanent budget deficits and whose name is ... United States of America. So logically, these revenues from the FED’s QE have probably helped paying a portion of the US monstrous public debt.

Is not this very rejoicing? No there is no reason to rejoice and now your anger is allowed to burn freely because no single USD from these QE revenues has been handed over by FED to the American State. And to make thy anger complete, remember that the US State has a monstrous public debt of USD 19 381 billions and meanwhile the country really need any single USD available, FED is keeping for itself this annual QE revenue of USD 67 billion for which it has done no work. The guys in New-York are very patriotic, good in governance and transparency and as you can see, they are not trying to implement a new world order of darkness. Very nice having a central bank belonging to the State which is dying under a huge bondage of public debt while the central bank is thriving and keeping for itself huge revenues from securities purchased with money created from nothing! And we are talking here about the central bank which is the guarantor of all the overwhelming amount of USD circulating in the world economy.

Just an example to illustrate things. If you hand over USD 67 billion to the American State annually and this during two years then the US State will have enough money to launch a “Marshall plan” for Africa trough the complete financing of the New Partnership for Africa Development (NEPAD). The African American devoid of his own genuine spirit has spent eight years in the White House without having the least idea of what one may do for Africa. And concerning poor Americans, agitation and Hollywood style speeches are the best answers the African American dwelling ( for few remaining months) in the White House since eight years has found. He has no idea of what FED is doing with the revenues from QE.

The other guys from New-York will here complain that they are entitled only to 6% of FED’s dividends as private shareholders. Well, why not granting each American citizen this right to FED’s 6% dividend? And moreover, each manager knows that it is the person managing who decides the real level of dividend because he can take hundreds spending decisions in his own favor in order to eat up all the turn over before handing over a meaningless 94% of small dividends to the State Treasury. So were has gone the huge Revenue from Quantitative Easing? See the private guys in New-York. The African American in the White House (for few months again) knows nothing about this.     

End of story.

But the story is a worldwide one, so let us continue.

The major central banks of the world ( FED , ECB, Bank of Japan, Bank of England mostly) have since 2007 ( the beginning of the crisis that is still ongoing ) injected nearly USD 13,000 billion in the economies of the concerned countries via Quantitative Easing (QE). If we still assume an average overall yield of only 1% per year, it is a substantial and growing average annual revenue that these central banks have earned since 2007. At the full capacity, this substantial revenue was nearly USD 130 billion per year.

Now you citizens of Japan , Great Britain and of the countries that are (still) in the Euro zone can check whether the central banks just mentioned above, deposited back the QE revenues into the public accounts of the concerned countries (Japan , Great Britain and countries that are still in the EU) which indeed are heavily indebted. I did not check this but is it too much assigning this small weekend exercise unto you? You can even pass over this simple exercise to thy beloved MPs and insist that they should summon thy prime minister and central bank governor and put the question to them.

Shalom to all the nations of the earth.

Rev. Apostle Joseph TOUBI

josetoubi@gmail.com

josetoubi@hotmail.fr

2016-07-16