Stoneleigh on 2BWS

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PeakerSeeker's picture
PeakerSeeker
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Stoneleigh on 2BWS

Anybody listened to this podcast?

The part that I'm unclear about is the discussion of QEII. Foss claims that quantitative easing is actually just creating more credit and doesn't involve any actual printing. She also goes on to say that you can't print your way out of deflation - won't massive printing by definition cause hyper-inflation?

 

Interested to hear thoughts on this... 

idoctor's picture
idoctor
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Ok where's the link LOL??

Ok where's the link LOL??

PeakerSeeker's picture
PeakerSeeker
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http://twobeerswithsteve.libs

http://twobeerswithsteve.libsyn.com/the-modern-day-paul-revere-nicole-foss-of-automatic-earth

 

I'm starting to understand more as I read more about it, but I still don't see how physically printing money can not be inflationary. So the question is: does all the QE2 nonsense end with actual printing or not?

SteveW's picture
SteveW
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PeakerSeeker wrote: The part
PeakerSeeker wrote:

The part that I'm unclear about is the discussion of QEII. Foss claims that quantitative easing is actually just creating more credit and doesn't involve any actual printing.

1. The Fed buys Treasuries from the primary dealers and EFTs the money.

2. The primary dealers pay the Treasury by EFT, keeping a small cut for themselves.

3. The Treasury cuts cheques and EFTs funds for Social Security.

4. The folks on Social Security use their credit cards to buy food.

EFT (electronic funds transfer) means there's no money printing just a whole bunch of electrons flying around the internet, very efficient saving the cost of paper, ink, shipping and labour. Laughing 

cmartenson's picture
cmartenson
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It is money printing, without any doubt

There's some sort of word-twisting going on (or idea mangling) with any description of the Fed QE program as anything other than money printing.

Only one type ofbase  money exists in the US and that's the stuff that flows directly out of the Federal Reserve.  We can detect the amount of that money by simply looking at the Fed balance sheet.  Every time the Balance Sheet expands, there's more base money out in the world.

QE expands the balance sheet, ergo money is being 'printed.'

About this there cannot be any doubt at all, there's no wiggle room here.

However, one could try and claim that the Fed can always reverse these transactions and drain money (un-print it, as it were) and while this is certainly true, this is not the same thing as QE not representing money printing.  Heck, in theory the Fed can  undo every single one of its POMO purchases throughout all of history and take the money supply to zero, but it's not going to do this.

It is only by speculating about when and by how much the Fed is going to unwind its prior POMO purchases that we could claim "it's not really money printing" because we expect the POMO purchases to be unwound and therefore they are really a form of credit and not money.

But that's an unecessary level of idea mangling.  Far simpler is to note that money is created when the Fed buys something and stuffs it onto its balance sheet, and money is taken when when the reverse happens.  no idle speculation about Fed intent or amounts required.  

 

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plato1965
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   in theory the Fed can

 

 in theory the Fed can  undo every single one of its POMO purchases throughout all of history and take the money supply to zero

 Wouldn't that assume that banks who were happy to unload toxic MBS at full value were prepared to buy them back at the same price.. ?

Where the FED deliberately, or accidentally overpays for assets, then perhaps that proportion of the printing is irreversible...

 Maybe Bernanke thinks he knows a greater fool... ? If so I think he may be mistaken... Laughing

 

 

 

 

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cmartenson
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Good point.
plato1965 wrote:

 

 in theory the Fed can  undo every single one of its POMO purchases throughout all of history and take the money supply to zero

 Wouldn't that assume that banks who were happy to unload toxic MBS at full value were prepared to buy them back at the same price.. ?

Where the FED deliberately, or accidentally overpays for assets, then perhaps that proportion of the printing is irreversible...

 Maybe Bernanke thinks he knows a greater fool... ? If so I think he may be mistaken... Laughing

Good point.

Money would run out waaaay before the Fed was finished!

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