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From the FED: " The term "printing money" often refers to a situation in which the central bank is effectively financing the deficit of the federal government

From the FED: " The term "printing money" often refers to a situation in which the central bank is effectively financing the deficit of the federal government on a permanent basis by issuing large amounts of currency. This situation does not exist in the United States." http://www.federalreserve.gov/faqs/money_12853.htm http://www.federalreserve.gov/faqs/money_12853.htm Perhaps they are lying about what is really going on but I think transparency is of primary importance for the functioning of the bond market and I'm assuming they aren't lying.

nostromo 12y ago
The term "permanent basis" is the only part of the statement that prevents it from being a lie. The Federal Reserve does not want to do QE forever. But they have been doing that almost nonstop since 2008.
- yequalsx 12y ago
  That's what the balance sheet aspect is. There is a due date on the securities purchased by the Fed. Thus there is a time a limit. The Fed does not consider quantitative easing as just printing money. I think if it were just printing money then people would not have faith in Treasury securities and thus the interest rate would be a lot, lot higher than it is now. EDIT: From the link supplied above: "Global demand for Treasury securities has remained strong, and the Treasury has been able to finance large deficits without difficulty. In addition, U.S. currency has expanded at only a moderate pace in recent years, and the Federal Reserve has indicated that it will return its securities holdings to a more normal level over time, as the economy recovers and the current monetary accommodation is unwound."
- elektronjunge 12y ago
  QE finished last October.
toasted 12y ago
Wait - but quantitative easing usually involves buying back government bonds (in recent times it has also involved buying riskier instruments like collateralized debt obligations (eg. bundled mortages from freddy mac/fannie mae)) But government bonds are issued by the government as a form of govt debt to finance the federal government deficit. So doesn't that mean that money IS being printed to finance government deficit? It's just that it goes through a slightly convoluted path to get there?

nostromo 12y ago

The term "permanent basis" is the only part of the statement that prevents it from being a lie. The Federal Reserve does not want to do QE forever. But they have been doing that almost nonstop since 2008.

yequalsx 12y ago
That's what the balance sheet aspect is. There is a due date on the securities purchased by the Fed. Thus there is a time a limit. The Fed does not consider quantitative easing as just printing money. I think if it were just printing money then people would not have faith in Treasury securities and thus the interest rate would be a lot, lot higher than it is now. EDIT: From the link supplied above: "Global demand for Treasury securities has remained strong, and the Treasury has been able to finance large deficits without difficulty. In addition, U.S. currency has expanded at only a moderate pace in recent years, and the Federal Reserve has indicated that it will return its securities holdings to a more normal level over time, as the economy recovers and the current monetary accommodation is unwound."
elektronjunge 12y ago
QE finished last October.

toasted 12y ago

Wait - but quantitative easing usually involves buying back government bonds (in recent times it has also involved buying riskier instruments like collateralized debt obligations (eg. bundled mortages from freddy mac/fannie mae)) But government bonds are issued by the government as a form of govt debt to finance the federal government deficit. So doesn't that mean that money IS being printed to finance government deficit? It's just that it goes through a slightly convoluted path to get there?