The developing Fed version that most are excited about is most akin to the Japanese first failed effort. Here's a rough summary of each In 2001-2006 Japan the BOJ initiated QE. In their version they offered significant lending to the Japanese banking system for good collateral

The balance sheet doubled in size at a pace of 35 Tn yen per year. However of that 35tn only 5 was direct asset purchase and most of that was Japanese Tbills. This is very similar to the BTFP program from SVB time and the current SRF. It was also sorta similar to ECB LTRO

Its goal was to flood banks with liqudity so they could make loans. It failed because it was pushing on a string. The banks used to funds to deleverage from bad loans and did no real lending. Similar to today providing banks with reserves and SRF lending does not stimulate

Lending. I'll briefly drop into the UK. The UK is the only central bank that has ever understood QE. They bought bonds in the GFC to suppress risk premiums and bid up assets causing lower market based corporate borrowing costs and higher wealth. THEN when they ended QE they

Sold bonds in the market directly reversing the QE They are gods US version 1 was done early in the GFC. They bought assets from banks that were being forced liquidated by banks, that action slowed the unwind and helped save the banks. U.S. 1 was a financial stability

based policy. NOT a monetary policy per se. It was highly effective. The first few months of COVID QE was reminiscent of US 1. But both in GFC and Covid the Fed used another version for most of the time

U.S. version 2 was the monetary policy version where the goal wasn't to save banks in financial stress. It was to deal with the fact that interest rates were zero and couldn't be lowered. It was persistent. Without fiscal policy support it was largely ineffective as stimulus

As its action was almost exclusively to bid up asset prices and depended on asset holders to spend and leverage up. Without fiscal support they didn't. They didn't work anywhere on earth on any version even the Brit's but in the US they mostly were ineffective. Stopping

Announcing tapering, and starting QT done not like the UK but via runoff all created brief corrections but the QT was so tame it did very little. After the brief US 1 QE during Q2 2020. US2 worked because it didn't deleverage the private sector pushing on a string but did allow

Cash printed fiscal spending. ECB version was as often is the case with the ECB a lot of everything. Like Japan failed version they did huge lending operations called LTRO which was creative because it was term funding. They also did some fiscal offset in the Periprhery

and some US 2 type. But they also were smaller broadly. Fiscal was mild. Japan version 2 all in was a complete abandonment of their failed version and more aggressive than any other. They BOUGHT Equities. Now that is stimulative as hell and bad for your currency. They

Also used YCC set t a very low rate and essentially assuming most of the government debt sold during the period. This wasn't about banks. It was a full throated direct stimulus AND aggressive financing of fiscal stimulus programs. Fwiw they haven't hardly even stopped. They

From QT. Anyway the point is there are a lot of balance sheet expansions methods and they have had varying levels of impact. The one in play for sometime in 2026 is a Japanese failed version push stimulus which should have limited impact.

@dampedspring Great thread. Sometimes the old ways are the best. The UK the only central bank to understand QE isn’t free

@dampedspring Here are the analysis results. 👇

@dampedspring Great thread, Andy Perhaps write as well about European banks ... still trading at reasonable multiples despite a massive run. How come? Can it be sustained¿? Ta 🙏

@dampedspring Great thread, Andy. Very thoughtful stuff.

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