Home > Main > Does QE really do anything? Nope.

Does QE really do anything? Nope.

November 19, 2010

There has been so much fear over the last few years that inflation will smash the U.S. economy.  The reason given is that the fed is printing tons and tons of money through quantitative easing.

Here is the plain truth about Quantitative easing – it does not print money.  It exchanges cash money for term money.  Quantitative easing is as though the Treasury has issued 3 month T-bills instead of longer term paper, that is all.

Even quantitative easing that purchases MBS instead of Treasury notes is similar in effect – it is a swap of 3 month T-bills for MBS.

That is why this video is not even wrong:

The fed isn’t printing money – the money was created when the Treasury spent more than it received in taxes.   Federal Reserve actions with any Treasury bill are about the price of borrowing at term, and not the quantity of money.

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