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They did rapidly expand the monetary supply and it did cause inflation. Assets are sky high (stocks and real estate). Properties are priced 10-20x cash flow. St
by simplecomplex 7y ago
They did rapidly expand the monetary supply and it did cause inflation. Assets are sky high (stocks and real estate). Properties are priced 10-20x cash flow. Stocks are similarly trading at absurd earnings ratios.
Does anyone remember https://en.wikipedia.org/wiki/Japanese_asset_price_bubble https://en.wikipedia.org/wiki/Japanese_asset_price_bubble ?
Massively expanding credit to the point where money is free .... reduces the value of money. But denial is a helluva drug.
- brobinson 7y agoQE does not expand the monetary base so it can't cause inflation. It's also not "printing money" as the media likes to call it. You can't talk about the Japanese asset bubble without talking about the Plaza Accord and the appreciation of the yen.
- simplecomplex 7y agoWhen the Fed monetizes assets (QE) it adds to bank reserves (monetary base) AND adds to demand deposits at commercial banks (money supply) that held those assets. Where does the Fed get money to purchase the assets? They create it. Obviously no “printing” is happening it’s on a computer. When the Fed buys the assets they add credit, giving the banks more than they need in reserves. Banks then seek to make a profit by lending that extra money, thus “stimulating” the economy. The whole point of QE is increasing liquidity by increasing the supply of money.
- brobinson 7y agoQE is neutral to the monetary base. The central bank buys government bonds from banks and pays for them using reserves. You can see a big spike in the money supply, but there is no corresponding increase in inflation.