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I agree with everything here except the reference to QE. Quantitative Easing works to control the money supply only because the central bank can quickly mop the
by comicjk 7y ago
I agree with everything here except the reference to QE. Quantitative Easing works to control the money supply only because the central bank can quickly mop the money back up by selling the bonds it previously bought. The central bank can't mop up money it sent to people as wages, so if inflation started, they would have no leverage.
- gridlockd 7y agoThe QE money never has been mopped up, nor can it be mopped up quickly. QE has caused asset price inflation. Also, QE is already back in effect, they're just not calling it QE. https://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm https://www.federalreserve.gov/monetarypolicy/bst_recenttren... By contrast, paying wages to otherwise idle workers isn't going to make much of a dent in the CPI. If it did, there would be a clear correlation between unemployment rate and consumer prices.
- neilwilson 7y agoThere’s no operational difference between selling old Gilts back to the market and the ability to issue new ones. Under expectations they work the same way. Spending is automatically recovered by taxation of the flow. If the central bank spends on wages, the Treasury will end up running a surplus.