Quote from: pening on March 31, 2014, 07:53:26 PM

Ask Japan, they've been trying to inject some inflation for over a decade. The reason is that many following pop-economics dont accept/understand that inflation is a measure of price increases, not increase of the monetary base. This may lead to inflation due to excess money supply, but its not a certainty. cf Japan...

Quote from: lnternet on March 31, 2014, 01:43:57 PM

The Fed is not printing money, from what I understand.

And that's the other point ignored. Quantitative Easing isn't printing money - the clue is in the use of different words. People think it's just a fancy way of saying the same thing, and it is very similar in principle. But in detail, its different. The money is going in to bonds to effect bond prices change, and into bank balance sheets. This is key, it answers "where is the money going". Another detail over looked is the bonds are cancelled, the Fed/BoE have a large stash of bonds which they can sell back to the market to remove excess supply in future. If in some future years they don't do this, that when you may begin to see significant inflation problems. There's another factor of exporting the inflation abroad, mostly to emerging markets where they have lots of growth to soak it up and its largely hidden (but that's complicated I don't really get that whole aspect).

That said, running such a massive deficit as we in the UK and US are is bonkers, though as far as i can tell half the problem in the US is tax breaks from previous administrations that haven't been reversed. You'd be amazed how quickly the deficits reduce with even a few % increase in tax revenues. But the anti-taxation Austrian school don't want to say anything about that.

Good explanation. I would add that the ultimate goal of Quantitative Easing is to create liquidity in the near term. The problem is that when private balance sheets are underwater, you can flood the market w cheap money but the private sector still have no choice but pay down their balance sheets and deleverage debts. QE by itself is not enough to jump start the economy. Richard Koo describes this as a "balance sheet recession"