Is Quantitative Easing the Same as Printing Money?
QUESTION: Mr. Armstrong;
Thank you for coming to Athens. After the presentation, there were so many questions that the moderator did not have time for. You answered some for the crowd afterwards that I had never heard anyone ever explain. You said Quantitative Easing was not money printing nor did it really increase the money supply. You also said to the crowd that fiat is not paper money, but anything declared by government including pegs.
Could you elaborate on those statements.
Thank you for your enlightenment.
GP
ANSWER: Quantitative easing is not responsible for increasing the money supply or printing money. It is a swap of bonds for cash so they are not outright printing money. It is a swap transaction. This combined with the idea that paper money is fiat and precious metals are tangible are all seriously wrong. Fiat is the attempt by government to decree the value of money. This is no different from a peg that broke, such as the Swiss/euro peg, or the Bretton Woods attempt to fix gold in terms of dollars. ANY attempt to flat line the value of money by decree is fiat, regardless of whether the instrument is paper or seashells.
This idea that Quantitative Easing is printing money is very pre-1971 thinking and is a throwback to Bretton Woods. Such an assumption focuses on the differentiation between debt and money or cash. Pre-1971, you could not borrow against government debt so there was a clear difference between debt and money. The theory that it was less inflationary to borrow than print made sense only when there was a real difference between debt and cash or money.
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