IFB147: How Does the Fed Affect Joe Schmoe

IFB147: How Does the Fed Affect Joe Schmoe

Update: 2020-04-16


Announcer (00:00 ):

You’re tuned in to the Investing for Beginners podcast.

Finally, step by step premium investment guidance for beginners led by Andrew

Sather and Dave Ahern. To decode industry jargon, silence crippling confusion

and help you overcome emotions by looking at the numbers. Your path to

financial freedom starts now.

Andrew (00:36 ):

Welcome to the Investing for Beginners podcast. This is

episode 47 I’m in the driver’s seat right now, but don’t worry, Dave is right

here. We’ve got a lot to talk about and I’m going to be asking him a ton of

questions because he’s been watching this particular topic, especially closely

and knows a ton more than I do about it. And so it will be a good episode for

me to ask questions because I’ll be coming at it from the mindset of a

beginner. And I’m hoping that a lot of people are feeling that way too. And

you’ll be able to answer a lot of our questions. So what’s up with the fed?

First off, tell us what the fed has been doing lately and then maybe we can

explain what they are and what they’ve done lately in respects to like the

2008, 2009 great recession and some of the events since then, but whether

they’ve been doing and how is that affecting the economy and the current virus

and everything like that?

Dave (01:44 ):

Boy, that’s a good question. So the, the fed has, for

those of you who are not familiar with what we’re talking about, the, the, what

we’re referring to is the federal reserve bank. So this is the central bank for

the United States. And in essence what they do is they are there to help

stimulate the economy or slow down inflation. So their basic two rules are they

want to create more jobs and they want to, they want to control inflation as

best as they can. So the way that they do that is they use funds with the banks

to try to create more money or reduce money in the economy. And now does that

mean that they physically print more money? Not necessarily. They do. Do some

of that. But the majority of what they do is they create money by creating money

with the other banks in allowing them to buy bonds from the federal government.

Dave (02:41 ):

So treasuries, and then that money is is taken away. It’s

not taken away. It’s used as deposits to lend out to us to buy stuff, cars, you

know, buildings, restaurants, whatever it may be, houses, all those kinds of,

and so that’s how they put more money back into the system. So what they’ve

been doing recently with the coronavirus hitting us, the pan Ana that has gone

through the world, they have taken their balance sheet and basically exploded

it. They’ve just kind of opened everything up and said, whatever it is, we’re

going to buy it. So the first thing that they did was they lowered all the<br...








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IFB147: How Does the Fed Affect Joe Schmoe

IFB147: How Does the Fed Affect Joe Schmoe

Andrew Sather and Dave Ahern