Economics Questions

Re: Would someone please refute this piece on why QE2 isn't inflationary?

mgdpublic — Mon, 25 Apr 2011 14:01:13 GMT

Ok that first thread answered the question. Thanks.

Re: Would someone please refute this piece on why QE2 isn't inflationary?

Smiling Dave — Mon, 25 Apr 2011 01:16:37 GMT

First of all, Jon Stewart had Bernanke admitting it IS money printing about a year ago, then more recently saying it is not. Youtube is your friend.

Here are links to some threads on the subject.

http://mises.org/Community/forums/t/20916.aspx

http://mises.org/Community/forums/t/21020.aspx

And here: http://mises.org/Community/forums/t/20935.aspx

And here: https://mises.org/Community/forums/t/22235.aspx

And here: http://mises.org/Community/forums/t/23286.aspx

Here is a bit of wikipedia on QE. Note Step 2, which is the money printing:

Steps

The central bank has previously targeted an extremely low rate of interest, near or at zero percent.
The central bank credits its own bank account with money it creates electronically.^[10]^[37]
The central bank buys government bonds (including long-term government bonds) or other financial assets, from commercial banks or other financial institutions, with the newly created money.^[10]^[37]

Now, Bernanke had the gall to explain that it is not money printing because no new currency is put into circulation. Meaning physical paper dollars are not run off a prining press. But electronic dollars ARE created, and he mumbles his way through that.

And of course it is inflationary.

Re: Would someone please refute this piece on why QE2 isn't inflationary?

Rcder — Sun, 24 Apr 2011 18:20:38 GMT

According to the Austrian understanding of inflation, which is an increase in the money supply, then quantitative easing is undoubtedly inflationary. However, as has been pointed out in other threads, this money isn't being loaned out to the general public at a very high volume so the increase in prices isn't that exponential.

I'm sure someone here has the numbers on it, but most of the money from QE2 is being kept in the national Federal Reserve bank and the regional banks.

Would someone please refute this piece on why QE2 isn't inflationary?

mgdpublic — Sun, 24 Apr 2011 17:33:10 GMT

http://pragcap.com/bernanke-explains-why-qe2-is-not-money-printing-again

I know I'm a bit late to the party on asking this question. As I read it, the first thing I thought of is that banks now have cash to loan whereas they once had bonds. That seems inflationary to me. Is that where he's wrong? Thanks in advance!