As imtringued also pointed out to you, the central bank in no uncertain terms cannot create money.
QE is not carried out by creating money. It's carried out by creating bank reserves and exchanging them for assets at primary dealers, increasing liquidity. That article you linked elides a number of key intermediate steps. QE indirectly increases the money supply as I explained to you. Not directly as you seem to continue to imply. [1]
If the fed wants to buy $100b of assets tomorrow, it can do so, despite not having that money. The interbank mechanics are unimportant, the point is the value is created at will, creating inflation, and is a decision of a few powerful individuals.
Bank reserves are not circulating money because they cannot be spent. [1]
> The interbank mechanics are unimportant...
They are literally the only important thing. That's all we've been talking about.
The bank having these reserves frees up room for the bank to lower their interest rates and in turn create more loans. See, it's this lending process that creates new circulating money. The Fed issuing 100T of reserves and giving it to BoA would not change the circulating supply one iota in and of itself.
> ... the point is the value is created at will ...
Again, no, no value is created by this operation. It's entirely neutral. What happens is these lower-interest rate loans (coupled with the obligation to repay same) increase the viability of business models, fund productive activities in the economy and back the newly created money. This is where new value is generated. Not in creating reserves.
> ... creating inflation ...
Again, no. Inflation is a measured effect. It has nothing to do with supply per se in the federal reserve model. Just ask Japan. They went absolutely ham on QE since the 1980s and they haven't seen inflation since 1995. [2] So much so it's actually been very problematic for them.
> ... is a decision of a few powerful individuals.
Yeah like every Supreme Court decision ever. These individuals are accountable to congress. This is called representative democracy.
Scottie, and I'm going to assume your name is Scottie - I mean this without disrespect. Please audit an economics class. And maybe a civics class. Thus far everything you have suggested is trivially wrong.
Quantitative easing (QE) is a form of unconventional monetary policy in which a central bank purchases longer-term securities from the open market in order to
increase the money supply and encourage lending and investment. Buying these securities
adds new money to the economy, and also serves to lower interest rates by bidding up fixed-income securities. It also expands the central bank's balance sheet.
I don't know why you don't think creating money and buying bonds and mortgage securities on the open market counts as money creation. Or if you're being particularly semantic about the mechanical flow of this money. None of these occur without the central bank changing digits in a database which magically allow new money to exist.
Your article you keep referencing is wrong in context scotty. They're not buying them for money, they're swapping them for reserves. It's not the same thing. It's an edge case operation, that the Fed will unwind in time, as they were happily doing between 2009 and the COVID pandemic. You're reading a babies-first-economics article. We're not in 101 territory anymore. At least read the Forbes one I linked you that goes into more detail.
You are wrong on this one, and you do not understand enough to even want to challenge your assumptions. We're done here, and I once again, implore you to audit an economics class.
PELLEY: Fair to say you simply flooded the system with money?
POWELL: Yes. We did. That's another way to think about it. We did.
PELLEY: Where does it come from? Do you just print it?
POWELL: We print it digitally. So as a central bank, we have the ability to create money digitally. And we do that by buying Treasury Bills or bonds for other government guaranteed securities. And that actually increases the money supply. We also print actual currency and we distribute that through the Federal Reserve banks.
He's just incredibly confused because central banks officials avoid saying the word "money printing" or "creating money" so that the public doesn't panic or accuse them of creating something out of nothing. Instead they use technical words like "Quantitative Easing" and "Asset Purchases" and then dumbasses like him buy into the wordplay whole heartedly.
Scottie even in that video you linked me you stopped short of the next sentence which says:
NARRATOR: But by law, Chairman Powell's Federal Reserve can only lend money that must be paid back.
Which is what I've been telling you.
Powell was providing a simplification, an analogy, so that folks such as yourself without a meaningful background in economics can understand. Obviously he did an insufficient job, and I strongly suspect this clip was out of context.
No, you seem particularly focused on a technical detail concerning the flow of money rather than the larger theme at play; that is, the value of money is at the whims of the central bank. I'm imagining those who lived to see the Zimbabwe dollar devalue from dollars to trillions of dollars would have a hard time believing you when you say central banks can't create money.
Furthermore, there are some that believe an interest rate should be determined by markets rather than policy makers.
And on the personal note, I have a minor in economics, my bachelors was finance. Economics is a broad subject, and even if you study monetary policy at the undergraduate level, the mechanics of central bank asset flow is not a subject well covered. But hey, thanks for the elitism and insulting the 99.99999% beneath you.
