Quote from: toknormal on April 01, 2014, 08:19:25 AM

I don't think any of the answers given so far are the reason there's not rampant inflation.

The reason is that the fed offers a competitive interest rate on excess reserves to serve as a magnet to "suck" all the new money back onto its own balance sheets as soon as the bond purchases are made, so that it doesn't get out into the economy.

Look - all the money (mainly in the form of US T-Bonds), is sitting backed up on the feds balance sheet... http://qz.com/157198/the-federal-reserves-balance-sheet-will-hit-a-mind-boggling-4-trillion-any-day-now/

Read this wiki article which states how the law was changed in 2008 to allow the fed to do this. The express purpose was so that they could start doing QE without it causing rampant inflation. http://en.wikipedia.org/wiki/Excess_reserves#In_the_United_States_.282008-.29

(Actually, this poster is saying the same thing)

Quote from: lnternet on March 31, 2014, 02:05:47 PM

Quote from: AlexGR on March 31, 2014, 01:49:04 PM

When we say the govt is printing money, we are not really talking about the paper notes in circulation, rather electronic money (digits in a computer screen) that exists in bank accounts.

Yes, of course. They are not doing that either though.

an excerpt from some quick google search result:

Quote

When the Fed creates $85 billion, it uses this money to buy bonds - typically split 50/50 between US Treasuries and Mortgage Backed Securities (MBS). Here is what's important: When the Fed creates and gives $85 billion in reserves to its member banks, it removes $85 billion worth of assets (bonds) from the balance sheets of those same member banks. The result is that no new net financial assets enter the economy.

I agree. Some of us here is looking at the issues at the macro level. While most bitbugs are looking at it from a micro level. The purpose for QE is for liquidity. Inflation doesn't matter as much as long as production levels increase and that debt can be paid off (money destroyed).

The bigger problem is liquidity trap. When businesses don't have access to credit they have to downsize. Then unemployed workers can't consume and the business have to do more downsizing. When the population saves too much there is no demand for goods & services. Deflation is bad for economy unless we are trying to counter balance a period of too much inflation.

Most economists recognize this, however, it's not easy to influence the economy merely from monetary policy. "Pushing on a string" is the term they use