quantitative easing

Our Dollar, Your Problem: An Insider’s View of Seven Turbulent Decades of Global Finance, and the Road Ahead

by Kenneth Rogoff  · 27 Feb 2025  · 330pp  · 127,791 words

in dealing with the European debt crisis, Merkel was playing a much more challenging game. Of course, most European central bankers understood perfectly well that quantitative easing in the eurozone—when the European Central Bank issues very-short-term bank reserves to purchase the national debt of, say, Italy—is not at

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currency. In 2011, the famed conservative economist and Federal Reserve historian Allan Meltzer started writing about how the Federal Reserve’s “quantitative easing” policies would end up fueling inflation. Under its quantitative easing policies, the Federal Reserve issues bank reserves (traditionally thought of as a form of “money”) to buy up assets, mostly long

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Interest in Influencing Federal Reserve Decisions If He Regains the White House,” Reuters, August 8, 2024. 18. To be fair, almost everyone was bamboozled by “quantitative easing,” mainly because central banks pushed so hard to insist that it was a big deal. It is basically mumbo jumbo for having the U.S

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is smoke and mirrors because the Treasury owns the Federal Reserve in full. A terrific paper, “Fifty Shades of Quantitative Easing,” demonstrates the point that although central bank research departments tend to find that quantitative easing “works,” outside academic researchers find much weaker effects, if any, with the exception of periods of market dysfunction

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when the central bank is acting as what economists term “a market-maker of last resort.” Brian Fabo et al., “Fifty Shades of Quantitative Easing: Comparing Findings of Central Bankers and Academics,” Journal of Monetary Economics 120 (May 2021): 1–20. 19. Allan Meltzer, “When Inflation Doves Fly,” Project Syndicate

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establishment of, 51 impact of actions, 229–33 independence of, 51, 248, 251, 252 interest rate policy, 169–70, 248 mandate of, 229, 248, 258 quantitative easing, 257 social justice policies and, 247–48, 255–56 swap lines, 231–35 FedNow, 203 Feige, Edgar, 191 Feldstein, Martin (President, National Bureau of Economic

Globalists

by Quinn Slobodian  · 16 Mar 2018  · 451pp  · 142,662 words

witnessed a return to a pattern of redistribution or a turn to Keynesian welfare state ideology. The state absorption of private debt and policies of quantitative easing have not reversed the long-standing realities of “private Keynesianism” that exacerbate the gap between the hyperwealthy and the rest. Yet the legitimacy crises that

Gilded Rage: Elon Musk and the Radicalization of Silicon Valley

by Jacob Silverman  · 9 Oct 2025  · 312pp  · 103,645 words

moonshot ambitions, the free money began to run out. Chapter 14 The Tap Turns Off The pandemic economy stayed afloat (barely) on a tide of quantitative easing, increased social spending, occasional stimulus checks, and the labor of essential workers braving the possibility of infection. For those stuck at home, typing away at

When the Money Runs Out: The End of Western Affluence

by Stephen D. King  · 17 Jun 2013  · 324pp  · 90,253 words

promise a return to prosperity sooner rather than later. All the while, however, levels of economic activity remain surprisingly muted. Interest rate cuts, fiscal stimulus, quantitative easing and exhortation have all been used to kick-start economic activity, all seemingly to no avail. There is no quick fix. And policies designed to

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Knowing this, the natural response by households and companies is to hang on to the money they've got, stuffing it under the proverbial mattress. Quantitative easing is designed to overcome the perceived shortage by directly injecting money into the economy at large, without having to go through the banking system. If

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off, companies' borrowing costs drop and, thus, spending begins to revive: if we all believe this, a rate cut can become a self-fulfilling event. Quantitative easing, unfortunately, doesn't offer the same intuitive message: for many, it sounds distinctly suspect, has no personal relevance and, thus, makes little difference to economic

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behaviour. And with economic performance far worse than the protagonists of quantitative easing expected, the credibility of such esoteric measures has steadily withered on the vine. One reason for increased scepticism relates to the impact of lower long

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remain dependent on bank lending have, however, derived little or no benefit.7 The same arguments apply to households. By lowering long-term interest rates, quantitative easing should, in theory, boost the value of government bond portfolios (the price of bonds goes up) as well as the value of other, riskier,

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that capital will increasingly be at risk of being misallocated as a result of mispricing within financial markets, undermining long-term growth prospects. Most obviously, quantitative easing has allowed governments to avoid being penalized by the so-called bond market vigilantes. We have ended up with both incredibly low interest rates and

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the world a much happier place. The financial crisis has destroyed this separation of monetary church from state. By altering the yield on government debt, quantitative easing has, in effect, brought governments and central banks back together again. As a result, policy incentives have begun to change and, once again, central

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. They can engage in ‘financial repression’, siphoning funds to themselves that might otherwise have gone to, for example, small and medium-sized companies.10 Quantitative easing provides one mechanism to allow them to do so. To be fair, this was not the intention. As I've already argued, the idea was

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to kick-start economic growth via quantitative easing, creating a virtuous circle of rising activity, higher tax revenues, falling social expenditures, reduced budget deficits and, hence, stable – or, even better, falling – levels

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demand and credit and that, with the appropriate monetary medicine, the economy would return to some kind of normality. The medicine, however, hasn't worked. Quantitative easing has delivered little in the way of normality. It has, instead, contributed to what might best be described as four ‘traps’: the fiscal trap, the

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exchange rate trap, the ‘zombie’ trap and the regulatory trap. The Fiscal Trap The failure of quantitative easing to deliver recovery has, naturally enough, left investors feeling underwhelmed. One consequence of this has been a lack of economic risk-taking: profits may be

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up investing in what they regard as ‘safe’ assets less likely to fall in value. For the most part, that's been government bonds. Admittedly, quantitative easing has delivered the occasional temporary shot in the arm for riskier financial assets – most obviously, equities. It hasn't, however, led to the broader economic

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recovery that might have sustained such initial gains. Each time equity markets have rallied – as investors anticipate the positive effects of quantitative easing on the broader economy – they have subsequently stalled in the light of persistent economic gloom. At the same time, already large budget deficits have,

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rise as a share of national income. Whereas, in normal economic circumstances, governments might be penalized for such profligacy via a higher cost of borrowing, quantitative easing prevents that from happening. The government knows the central bank will not want to see higher interest rates – that might hinder recovery – but, in

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on the US Treasury Department's fiscal plans, yields were a full percentage point lower. Alongside the effects on risk appetite of the eurozone crisis, quantitative easing had worked its magic. In effect, central banks are underwriting government debt, whether or not the public finances are in a healthy state. Investors know

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Treasuries and gilts. The Exchange Rate Trap While central bankers may have no intention of creating excessive inflation, arguing that, with plenty of spare capacity, quantitative easing will have a bigger impact on output than on prices, they may be more relaxed regarding the exchange rate. Continuous printing of money, other things

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domestic income. A falling exchange rate leads to higher import prices and hence reduces a county's purchasing power over internationally produced goods and services. Quantitative easing that fails to bring stagnation to an end simply leaves a nation worse off. The more it's used, the more incomes will be

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unexpected impact of a sudden fall in demand, have been kept on life support thanks to the remarkable amount of policy stimulus – low interest rates, quantitative easing – on offer since the onset of the financial crisis. Their survival, in turn, may have reduced the profitability and income of more efficient companies and

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dynamic parts of the economy. The growth rate of the economy inevitably atrophies: surviving is not the same thing as thriving.12 The Regulatory Trap Quantitative easing provides one way for governments to jump to the front of the credit queue. It is not, however, the only way. Regulations designed to

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divert funds into the hands of government. Again, the intention may never have been there initially, but that, however, is not really the point. Like quantitative easing, regulation can trigger the law of unintended consequences. The Basel III regulations provide a good example. Even with the revisions announced on 6 January 2013

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from creditors whether or not their fiscal plans are sustainable. Governments have jumped to the front of the credit queue. THE CONSEQUENCES OF QUEUE JUMPING Quantitative easing and enhanced liquidity buffers for banks in effect work in opposite directions. Together, they offer a ‘push-me-pull-you’ approach to the financial

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only lead a horse to water. Yet this ‘push-me-pull-you’ problem pales into insignificance compared with the long-term implications of addiction to quantitative easing combined with persistently high government borrowing and ever higher levels of government debt. The ‘subsidy’ received by government – reflecting the underwriting of the value

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from other parts of the economy. One obvious implication of this is a widening spread between the low interest rates paid by governments benefiting from quantitative easing and the higher interest rates paid by other would-be borrowers. Households in both the US and the UK ended up paying much higher

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shockingly high. International investors were happier to flock to the ‘underwritten’ bonds of the US and the UK, notwithstanding possible long-term currency risk. If quantitative easing fails to deliver a lasting recovery in economic activity, it shifts from being part of the solution to becoming part of the problem. It provides

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influence on the level of economic activity and more on its distribution. Central bankers are, slowly but surely, being dragged into the world of politics. Quantitative easing and other associated macroeconomic ‘quick fixes’ are, it turns out, proving to be not much more than mechanisms to redistribute income and wealth, even though

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is a breach of trust. Savers, meanwhile, must be wondering whether the day will ever arrive when interest rates return to more normal levels. If quantitative easing fails to stimulate economic recovery and, instead, ends up simply as an addictive economic painkiller, its side-effects will eventually dominate the headlines. The creation

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To understand these issues, we need a bit of history. CHAPTER FIVE THE LIMITS TO STIMULUS Lessons from History Whether through interest rate cuts or quantitative easing, monetary decisions create both winners and losers. In the normal course of events, these decisions even out over time. Savers win during periods of high

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interest rates, while borrowers gain during periods of low interest rates. Even if quantitative easing makes it easier for governments to borrow in the near term, success should ultimately allow private sector activity to recover, thereby raising tax revenues, reducing

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the dosage of policy drugs should be increased, not so much through extra monetary stimulus alone but, instead, through additional government borrowing funded through more quantitative easing, thus invoking the spirit of both Roosevelt and Keynes. Paul Krugman, the Nobel Prize-winning economist, argues precisely this in his End This Depression Now

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argue that deficits could be increased by a further 7 percentage points of national income, as Roosevelt managed during his first term in office: with quantitative easing, there probably wouldn't be a bond market crisis but there could easily be a dollar crisis instead. Public spending in the US is

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dollar fall in value. That, in turn, implies that debtor countries will increasingly have no choice other than to ‘sell the family silver’. Even as quantitative easing operations encourage risk-averse domestic investors to hold more government bonds – their value ring-fenced by the actions of central banks – so foreign investors will

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rejection of bimetallism: the dollar and euro might, eventually, be rejected in much the same way, signalling both a period of monetary anarchy associated with quantitative easing and ‘currency wars’ and, in time, challenges from the renminbi and other ‘emerging’ currencies. In the late nineteenth century, the schism between debtors and

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lost decades clearly demonstrate. It is all too easy to end up locked into a situation where funds are siphoned off to the government – using quantitative easing, for example, to protect the value of government bonds and, therefore, to insulate governments from market discipline – thereby diverting funds away from the rest

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the inflationary upheavals of the 1970s. Could inflation return in current conditions? It seems unlikely. Even as central banks have attempted to reinvigorate economies through quantitative easing, inflation has mostly remained relatively well-behaved. Where it has picked up – most obviously in the UK following sterling's devaluation at the end of

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normal circumstances, government bond yields might rise in the event of creditors heading elsewhere, creating a powerful incentive for governments to behave themselves fiscally. With quantitative easing and other forms of financial repression, however, it's more plausible to argue instead that the currency would collapse, raising import prices. At that point

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a world where banks cannot easily deliver profits by borrowing cheaply at short-term interest rates and lending at significantly higher long-term interest rates: quantitative easing has put paid to that particular money-making channel. Instead, banks might charge for basic services – use of ATMs, provision of checking accounts – rather

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Reserve, Monetary Policy Report to the Congress’, Washington, DC, July 2010. 5. ‘Inflation Report’, Bank of England, Aug. 2010. 6. C. Bean, ‘Pension Funds and Quantitative Easing’, Speech to the National Association of Pension Funds’ Local Authority Conference, Bank of England, London, 23 May 2012. 7. Various other schemes have since been

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March 2012’, Basel, 2012 Barro, R. and Ursúa, J. ‘Stock-Market Crashes and Depressions’, NBER Working Paper No. 14760, 2009 Bean, C. ‘Pension Funds and Quantitative Easing’, Speech to the National Association of Pension Funds’ Local Authority Conference, Bank of England, London, 23 May 2012 Bean, C. ‘Some Current Issues in UK

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wealth (i) interest rates (i) and a new monetary framework (i) nominal GDP targeting (i) and politics (i), (ii), (iii) and redistribution (i) see also quantitative easing (QE) Chicago (i) China and commodity prices (i) financial systems (i) and globalization (i) income inequality (i), (ii) living standards (i) per capita incomes (i

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eurozone crisis (i), (ii) excessive (i), (ii) France (i) household (i), (ii), (iii) and inflation (i) Japan (i) and national incomes (i), (ii), (iii) and quantitative easing (QE) (i) repaying (i) debt deflation (i) debtors and creditors (i), (ii), (iii), (iv), (v) eurozone (i) home grown (i) deficient demand (i), (ii) deficit

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: queues government debt and central banks (i) eurozone crisis (i) excessive (i), (ii) France (i) and inflation (i) and national incomes (i), (ii), (iii) and quantitative easing (QE) (i) governments and central bank bailouts (i) and credit queues (i) mistrust (i), (ii), (iii) social spending (i) spending (i), (ii), (iii), (iv), (

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(i) attempted reforms (i) debt repayment (i) exports (i) government borrowing (i) government debt (i) liquidity trap (i) living standards (i) national income (i) and quantitative easing (QE) (i) stockpile of assets (i) and trust (i) unreliable estimates (i) Jay Cooke and Company (i) Jerusalem trip (i) Jews, attitudes towards (i), (ii

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and political extremism (i) monetarism (i) monetary policy (i), (ii), (iii), (iv), (v), (vi) a new monetary framework (i) see also Gold Standard; interest rates; quantitative easing (QE) Monetary Policy Committee (i) monetary unions (i) see also eurozone moral hazard (i) mortgage-backed securities (i), (ii), (iii) mortgages (i), (ii) Napoleon Bonaparte

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(i) Protestant work ethic (i), (ii) public sector see governments public spending (i), (ii), (iii), (iv), (v) government spending (i), (ii), (iii) social spending (i) quantitative easing (QE) (i), (ii), (iii), (iv), (v) ratings agencies (i) rationing (i), (ii) recessions (i) recovery from the Asian crisis (i), (ii), (iii), (iv) UK

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(iv) liabilities (i) mortgages (i), (ii) national income (i), (ii), (iii) per capita incomes (i), (ii), (iii), (iv) precious metal standards (i) public spending (i) quantitative easing (QE) (i) social insurance (i) sterling in the 1920s (i) voters (i), (ii), (iii) unemployment (i), (ii), (iii), (iv), (v) US Treasuries (i), (ii) USA

The Long Good Buy: Analysing Cycles in Markets

by Peter Oppenheimer  · 3 May 2020  · 333pp  · 76,990 words

rates were cut again. The power of central banks has been wielded many times since, not least in the current cycle, with the introduction of quantitative easing (QE) and, at times, similarly powerful guidance to instil confidence. This was, perhaps, most famously demonstrated in 2012 in the midst of the European sovereign

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in 2015/2016. Second, this cycle has been different from others in that it has been marked by unconventional policy easing (and the start of quantitative easing), together with historically low inflation and bond yields. Relatively weak profit growth has been another particular feature of this cycle, but alongside rising valuations. It

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, post the financial crisis, has been particularly unusual in the extent of monetary easing. The collapse in policy rates to zero and the introduction of quantitative easing, largely to deflect the deflationary consequences of the collapse in economic activity and asset prices in the wake of the crisis, has been a particular

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to spend $1 trillion in newly created dollars on the back of government and mortgage bonds to push interest rates lower through its programme of ‘quantitative’ easing, which was critical in triggering the rebound in the stock markets. A second and important contributor to this bull market has been the assent of

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and spread into a broader credit crunch, ending with Lehman Brothers filing for bankruptcy and the start of the Troubled Asset Relief Program (TARP) and quantitative easing (QE).4 Wave two in Europe began with the exposure of banks to leveraged losses in the US and spread to a sovereign crisis given

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2016, equity markets and fixed income (bond and credit) markets have moved higher together, although with significant differences in relative returns. Aggressive monetary easing and quantitative easing have had a strong effect in pushing up valuations in financial markets. Various academic papers have examined the impact of QE on bond prices, particularly

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measures that included the TARP bailout programme, authorising $700 billion to bail out banks, AIG, and auto companies. It also helped credit markets and homeowners. Quantitative easing (QE) – or large-scale asset purchases – refers to monetary policy that entails a central bank creating money that is used to buy predetermined amounts of

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markets, under certain conditions, of bonds issued by euro area member states. 6 Balatti, M., Brooks, C., Clements, M. P., and Kappou, K. (2016). Did quantitative easing only inflate stock prices? Macroeconomic evidence from the US and UK. SSRN [online]. Available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2838128

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returns, but it can also result in more demand for bonds as the yields fall, resulting in yet lower bond yields. Notes 1 See How quantitative easing affects bond yields: Evidence from Switzerland. Christensen, J., and Krogstrup, S. (2019). Royal Economic Society [online]. Available at https://www.res.org.uk/resources-page

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/how-quantitative-easing-affects-bond-yields-evidence-from-switzerland.html 2 See Gilchrist, S., and Zakrajsek, E. (2013). The impact of the Federal Reserve's large-scale asset

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the financial crisis.18 Of course, technology is not the only reason for this. The impact of austerity has contributed, as has the influence of quantitative easing. This process has helped to reduce the level of interest rates and boost corporate profits (as well as the trend for corporate buybacks in the

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to revert to the typical levels seen in the cycles prior to the financial crisis. As a result of these changes, and the onset of quantitative easing, valuations in financial assets have generally increased, suggesting lower future returns. Bond yields at the zero bound do not necessarily benefit equities. In general, the

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Royal Society [online]. Available at https://doi.org/10.1098/rstb.2009.0169 Balatti, M., Brooks, C., Clements, M. P., and Kappou, K. (2016). Did quantitative easing only inflate stock prices? Macroeconomic evidence from the US and UK. SSRN [online]. Available at https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2838128

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paradox v2.0: The price of free goods. New York, NY: Goldman Sachs Global Investment Research. Hayes, A. (2019, April 25). Dotcom bubble. Investopedia. How quantitative easing affects bond yields: Evidence from Switzerland. (2019). Royal Economic Society [online]. Available at https://www.res.org.uk/resources-page/how

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-quantitative-easing-affects-bond-yields-evidence-from-switzerland.html How to tame the tech titans. (2018). The Economist. Hutchinson, J., and Persyn, D. (2012). Globalisation, concentration and

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/news/dnb-publications/dnb-working-papers-series/dnb-working-papers/working-papers-2010/dnb232375.jsp Vissing-Jorgensen, A., and Krishnamurthy, A. (2011). The effects of quantitative easing on interest rates: Channels and implications for policy. Brookings Papers on Economic Activity, pp. 215–265. Wright, I., Mueller-Glissmann, C., Oppenheimer, P., and Rizzi

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-2009 financial crisis 169–174 emerging markets 171–173 forecasting 19–21 growth vs. value company effects 94–96 impact 169–170 phases 171–174 quantitative easing 173–174, 178–179 sovereign debt 170, 171–173 structural bear market 110, 118–119 A accounting, bubbles 163–165 adjustment speed 74, 89–90

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–217 and equity valuations 72–76, 206–208 and growth companies 92–94 historical 43, 202 and implied growth 210–215 and inflation 65, 70 quantitative easing 173–174, 202–205 and risk asset demand 217–220 S&P 500 correlation 72–73 speed of adjustment 74, 89–90 ultra-low 201

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–133 duration 136–138, 139–141 equity performance 135–136 Great Moderation 133–134, 187–189 non-trending 138–141 post-war boom 129–131 quantitative easing 134 secular 127–134 United States 136 C canal mania 152 CAPE see cyclically adjusted price-to-earnings ratio capital investment, Juglar cycle 3 CDO

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from 196–200 lessons from 244–245 market and economy incongruence 174–178 monetary policy 178–179, 201–205 opportunities 230–231 profitability 185–186 quantitative easing 202–205 returns 174–179 risk asset demand 217–220 structural changes 76–79, 93–96, 169–200 technology 189–190, 221–241 term premium

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inflation 65–66, 70 mini/high-frequency cycles 58–61 narrowing and structural bear markets 114–115 overextension 36–37 phases of investment 50–58 quantitative easing 173–174, 178–179 S&P 500 historical performance 42 valuations and future returns 43–45 vs. bonds 43–45, 68–76, 78–79 equity

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ESM see European stability mechanism Europe dividends 39–40 exchange rate mechanism 16–17, 111 Maastricht Treaty 17 market narrowing in 1990s 115 privatisation 132 quantitative easing 17, 204–205 sovereign debt crisis 170, 171–173 European Central Bank (ECB) 17, 171, 173 European Recovery Plan 129–131 European stability mechanism (ESM

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157–159, 178–179, 201–205, 239 austerity 239 European Central Bank 17, 171, 173 Federal Reserve 16, 102, 131, 134, 150–151, 157, 203 quantitative easing 17, 70–71, 119, 133–134, 173–174, 178–179, 202–205 Montreal Protocol 13 mortgage-backed securities (MBS) 159 MSCI indices 91 N narrow

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negative bond yields 201–220 demographics 215–217 and equity valuations 206–208 and growth 208–210 implied growth 210–215 monetary policy 201–205 quantitative easing 202–205 risk asset demand 217–220 neuroeconomics 24–25 ‘new eras’ 113–114, 150–157 ‘Nifty Fifty’ 114, 233 non-trending bull markets 138

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21–25 policy setting 25–26 public ownership 132 purchasing managers' index (PMI) 59–61, 86–87, 89–90 Q QE see quantitative easing Qualcom 149–150 quality companies 193 quantitative easing (QE) asset returns 70–71, 119, 178–179 bond yields 173–174, 202–205 start of 17, 133–134, 171 United Kingdom

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-low bond yields 201–220 demographics 215–217 and equity valuations 206–208 and growth 208–210 implied growth 210–215 monetary policy 201–205 quantitative easing 202–205 risk asset demand 217–220 UNCTAD see United Nations Conference on Trade and Development unemployment 121–124, 183–185 unexpected shocks 108 United

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Kingdom (UK) Black Wednesday 16–17 bond yields, historical 202 canal mania 152 deregulation 132 exchange rate mechanism 16–17, 111 privatisation 132 quantitative easing 204–205 railway bubble 148, 152–153, 157, 163 South Sea Company 147, 151, 153 United Nations Conference on Trade and Development (UNCTAD) 129 United

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–239 market narrowing 114 NASDAQ 149–150, 161 ‘Nifty Fifty’ 114, 130–131, 233, 235 post-war boom 129–131 profit share of GDP 186 quantitative easing 133–134, 171, 202–204 radio manufacturing 154, 225 railway bubble 153–154, 160 stock market boom, 1920s 148, 154, 157, 160 vs. Microsoft 236

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Zaitech 164 zero bond yields 201–220 demographics 215–217 equity valuations 206–208 growth 208–210 implied growth 210–215 monetary policy 201–205 quantitative easing 202–205 risk asset demand 217–220 WILEY END USER LICENSE AGREEMENT Go to www.wiley.com/go/eula to access Wiley’s ebook EULA

The Curse of Cash

by Kenneth S Rogoff  · 29 Aug 2016  · 361pp  · 97,787 words

be all that important, because central banks have found pretty good ways to get around it, using unconventional tools such as “forward guidance” and “quantitative easing.” The first involves telling investors that the monetary authorities intend to elevate inflation in the future, even if they cannot do it now. When it

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stuck at zero, since of course the real interest rate is the nominal interest rate minus the expected rate of inflation. A second idea is quantitative easing (QE). We discuss QE in much greater detail later in this chapter, but essentially it involves using short-term central bank debt to buy

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why central banks are looking so hard for new ideas. Yes, they can go back to some of the same tricks they tried in 2008—quantitative easing and forward guidance, as considered in some detail later in this chapter. But most central bankers are rightly skeptical that these alternative approaches are

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half the 1990s, work that is often overlooked.11 Fed economists anticipated many of the issues that would later become central to the debate, including quantitative easing, the role of fiscal policy, and the idea that an inflation target of 4% instead of 2% might substantially alleviate the problem.12 In

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with other appendices at the end of the book), which gives a flavor of some of the issues that need to be taken into account. QUANTITATIVE EASING We now turn to alternative approaches that central banks have adopted to deal with the zero bound, short of negative rates. This section deals

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with the policies that the monetary authorities actually used during the financial crisis, namely, quantitative easing (QE) and forward guidance. Our purpose is to ask to what extent these various alternatives obviate the need for negative interest rate policy, or at

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advanced-country central banks, including the Federal Reserve, the ECB, the Bank of England, and the Bank of Japan, have engaged in massive and aggressive quantitative easing. The scale of the interventions has been extraordinary. The Federal Reserve’s balance sheet rose from around $700 billion at the outset of the financial

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maintains its current pace, the Bank of Japan’s QE program is on track to hit the 100% of GDP mark within 2 years. Quantitative easing has been the focus of extensive recent empirical research, though subject to the major constraint that experience so far has been limited.21 We will

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turn to this research shortly. In a nutshell, much of it basically constitutes event studies that look at the impact of quantitative easing announcements on market interest rates. There is almost certainly a transitory effect (even when the announcements are partly anticipated). But it is hard to

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have done even more, despite concerns that arose about financial stability. Many central bankers would agree. Nevertheless, even the most enthusiastic central bank adherents of quantitative easing say they have little intention of using it again once policy interest rates rise above zero and the normal tools of monetary policy are restored

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the economy, there is no increase in aggregate demand, and the standard channel by which monetary expansion puts upward pressure on prices is shut down. Quantitative Easing Explained A lot of hocus pocus and confusion about the channels through which it has an impact surrounds QE. Superficially, at least, the basic

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simple, bearing in mind that the government fully owns the central bank and therefore the bank’s profits and losses. When the central bank executes quantitative easing to buy long-term government debt, it is basically shortening the maturity structure of government debt held by the public. That is because overnight

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the government does too much short-term borrowing, it becomes more vulnerable to a sudden upward pressure in global interest rates. A broader form of quantitative easing, which virtually every central bank also used during the financial crisis, involves issuing overnight bank reserves (electronic money) to buy private assets. Of course,

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government, it is they who ultimately gain or lose through all its financial operations. Under some admittedly extreme assumptions, basically ignoring many distortions and imperfections, quantitative easing does exactly nothing! The effect on the portfolio the private sector owns directly is offset by the effect on the government portfolio that the private

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taxes is an important qualifier in any analysis about the effects of QE. Given the theoretical and empirical uncertainties surrounding the channels and effects of quantitative easing, it is hard to know whether it is welfare improving, even if it does seem to temporarily impact interest rates. After all, if the

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QE or the flow of new injections of QE that matters most. I hope this section has cleared up some of the mystery surrounding quantitative easing. If not, then “Quantitative Easing Explained” (the section title) also happens to be the title of a hilarious and truly brilliant 6-minute cartoon video produced in 2010

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Omid Malekan that contains a lot of genuine insight, though hopefully readers of this book will also spot a few misconceptions.27 Empirics of Quantitative Easing Even though the empirical evidence on QE is far from decisive, pretty much everyone agrees that the first round of US

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later episodes are commonly referred to as QE II and QE III. As noted earlier, fairly incontrovertible evidence indicates that major announcements of changes to quantitative easing policies have significant short-run effects on the bond market. When on March 18, 2009, the Federal Reserve announced that it would purchase up to

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figure 8.5 illustrates, yields on 10-year inflation-indexed Treasury bonds rose on balance during each of the Federal Reserve’s three tranches of quantitative easing and then began to fall as the purchases came to an end. They continued to fall after. Of course, this correlation is very superficial,

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, where it is even harder to show an effect. Figure 8.5: Ten-year Treasury inflation-indexed security, constant maturity. Note: Shaded areas represent quantitative easing purchase periods. Source: Board of Governors of the Federal Reserve (from Federal Reserve Economic Data at the St. Louis Federal Reserve

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has tried. To date, the effects on short- and long-term inflation have been mildly disappointing. I believe that the Bank of Japan’s quantitative easing policy would have been more effective had it communicated a willingness to allow inflation to overshoot targets for an extended period if necessary. This approach

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would be more in line with the analogy of escape from a sand trap. Quantitative easing does create some vulnerabilities, and these do need to be acknowledged in balancing the costs and benefits of a more aggressive policy. Suppose, for

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well ask why, instead of overnight debt, the government is not issuing 100-year debt to lock in near-historic low rates. In sum, quantitative easing is likely a significantly weaker instrument than conventional monetary policy. Given its rarity and relative newness, it is hard to be sure of the effects

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other options, but they would prefer to find more effective, clear-cut, and transparent instruments to use in the future. FORWARD GUIDANCE In addition to quantitative easing, some mention must be made of forward guidance, a term advanced by Columbia economics professor and central banking guru Michael Woodford. The basic idea is

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eschew the potential of open-ended negative rate policy, were it feasible.36 Finally, when comparing negative interest rate policy to much weaker tools like quantitative easing and forward guidance, it is important to recognize that any new tool will require a transition period as central banks adjust. It often takes decades

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of experience with any new tool, be it quantitative easing or negative interest rates, before economists can really form a strong and durable consensus. Theory does suggest that negative rates would be by far

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to raise inflation upward to 2%. For example, when in 2012 the Federal Reserve specified triggers that it would consider in deciding when to end quantitative easing, it picked an upper bound inflation rate of 2.5%. Why not pick 3%, or better, 4%? When the Bank of Japan adopted its

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is no increase in bonds. If the economy is at the zero interest rate bound, the only difference is that the central bank would use quantitative easing to mop up the newly issued debt. Helicopter money can only expand the options if it is accompanied by some other institutional change. For

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of negative rates, and a negative 0.1% on any further increase in reserve holdings. In principle, this policy strengthens the effect of future quantitative easing policies, because banks would have a stronger incentive to lend out any new funds rather than let them sit at the Bank of Japan earning

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the modest pre-crisis interest rate hikes didn’t help; it is difficult to disentangle cause and effect. Anyone who has followed the debate on quantitative easing, which, after all, is a weak substitute for negative interest rates, will recognize broadly parallel arguments. The concern is that QE bids up the

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Texas congressman Ron Paul argued that the financial crisis revealed the US central bank to be undemocratic and favoring the Wall Street elite. Through its quantitative easing polices, the Fed was massively raising the money supply (we have already noted why this characterization is incredibly misleading at the zero bound), and ultimately

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policy interest rate and provide their own measures. They conclude that at the height of the financial crisis, the sum of all monetary policies (including quantitative easing and forward guidance) brought the effective policy interest rate down to –2%, even though the actual policy interest rate was between zero and 0.

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not present any quantitative evidence or high theory, Lebow’s simple framework did capture many key issues and options. His analysis introduces the idea of quantitative easing, including both government and private bonds, and it also considers the idea of purchasing gold. He correctly recognized that having the central bank purchase private

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effective, QE that just swaps one kind of government debt for another is far less so. 27. See David Weigel, “The Man Behind the Quantitative Easing Video Speaks,” Slate, November 22, 2010, available at http://www.slate.com/blogs/weigel/2010/11/22/the_man_behind_the

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discussion on the difficulty of discerning any long-term effect of QE in his Econbrowser column “Evaluation of Quantitative Easing,” November 2, 2014, available at http://econbrowser.com/archives/2014/11/evaluation-of-quantitative-easing. 31. I first used the golf trap analogy in op-eds in Japanese newspapers in 2003 and am

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cause a run from short-term government debt into cash. Treasury bills are an order of magnitude larger than bank reserves, even after years of quantitative easing. In principle, the central bank can also solve the Treasury bill problem by simply charging for cash conversions, but this is basically an inferior

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Ending the World’s Ongoing Financial Plague with Limited Purpose Banking. New York: John Wiley. Krishnamurthy, Arvind, and Annette Vissing-Jorgensen. 2011. “The Effects of Quantitative Easing on Interest Rates: Channels and Implications for Policy.” Brookings Papers on Economic Activity Fall: 215–265. ———. 2013. “The Ins and Outs of LSAPs.” In Proceedings

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interest rate hike prior to 2008, impact of, 177–78; nominal policy interest rates, 2000–2015, 130; notes convertible to specie, early issue of, 26; quantitative easing by, 135–36 Bank of Japan: inflationary expectations, challenges faced in lifting, 124; inflation target, choice of, 153; January 2016 policy of, 250n5; museum of

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, understanding coinage debasement in, 20; negative interest rates, experience with, 1, 161; quantitative easing by, 135–36, 143; zero-bound problem of, lack of international coordination regarding, 206 Bartzsch, Nikolaus, 236n23 Baum, Frank (author of The Wonderful Wizard of

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domestic economy, demand for euros in, 236n23; negative interest rates, experience with, 1; nominal policy interest rates, 2000–2015, 130; profits from printing money, 81; quantitative easing by, 135–36; terrorist financing, concerns regarding, 77 Eurozone: buying back paper currency, cost in GDP of, 217; cash, restrictions on the use of, 64

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inflation and, 28; inflation target, choice of, 153; inflation targeting adopted by, 232; Nixon’s reelection and, 189; nominal policy interest rates, 2000–2015, 130; quantitative easing by, 135–36, 140–42; security in the event of a nuclear attack, 113–14; ten-year treasury inflation-indexed securities, constant maturity, 142; unconventional

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and, 183–84; higher, drawbacks to, 149–50; historical examples of high, 183–84; optimal choice of inflation target, effect of proposal on, 105–6; quantitative easing and, 136–37; rates of and wages/unemployment, 247n1; 4% target for, 121, 125–26, 133, 147–50, 152–53; target inflation rates, the

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Eurozone, and United Kingdom, 2000–2015, 130; opportunity cost seigniorage and, 82–83; on paper currency, Gesell’s proposal for, 163–67; quantitative easing and, 137–38 (see also quantitative easing); United Kingdom, 1930–present, 128; United Kingdom and United States short-term market, 1929–1939, 129; zero bound, at or near the, 130

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, 81–82. See also seigniorage profits from monopoly on paper currency, 217 proxy notes, 22 public health risks, 78–79 Putin, Vladimir (president, Russia), 72 quantitative easing, 123–24, 132–33; empirics of, 136, 140–42; explained, 137–40; financial crisis of 2008, in response to, 135–36; inflation, lack of

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in a liquidity trap, 246n26; as a policy instrument, limits of, 144–45; risks associated with, 178; zero bound sand trap, escaping from, 142–44 “Quantitative Easing Explained” (Malekan), 140 quantity theory of money, 26 radio-frequency identification (RFID) chips, 166 RAND Corporation, 49, 69 real-time clearing, 67, 92, 94–95

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bills, percentage of, 85; payments by instrument type, 54; payments per dollar amount per consumer, 54; phaseout of large-denomination paper currency, proposal for, 95; quantitative easing in, 140–42; revenue as a percentage of GDP, 2006–2015, 83–84; scanner data from retail transactions, 56–57; sexual exploitation in, 74; short

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options for, 125–27; monetary policy and, 123–24, 227–30; opportunistic fiscal policy as approach to, 154–56; previous experiences of, 122; quantitative easing as approach to (see quantitative easing); quantitative implications of, literature on, 132–35; reemergence of, reasons for, 120–22; relaxing the rigidity of the inflation-targeting framework as approach

The Alchemists: Three Central Bankers and a World on Fire

by Neil Irwin  · 4 Apr 2013  · 597pp  · 172,130 words

economic stagnation in the wake of a real estate and banking system collapse, the Bank of Japan begins a program of buying assets, known as quantitative easing. July 1, 2003—Mervyn King takes office as 119th governor of the Bank of England. November 1, 2003—Jean-Claude Trichet takes office as second

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time.” 2009 March 5—The Bank of England slashes its target interest rate to 0.5 percent and announces £75 billion of bond purchases, or quantitative easing. March 9—Global stock markets reach their lowest levels in over a decade, with the Standard & Poor’s 500 off 57 percent from its 2007

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peak. March 18—The Fed expands its own quantitative easing, to a total of $1.75 trillion in purchases of a variety of securities. March 24—Bernanke and Timothy Geithner, the treasury secretary and former

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with criticism of British bank regulation. August 6—King is outvoted on the Bank of England’s monetary policy committee, favoring a larger expansion of quantitative easing than the majority. August 25—President Barack Obama announces that he is reappointing Bernanke to a second term as Fed chair. October 4—The socialist

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the powers of the Fed. August 27—Bernanke gives a speech at the Jackson Hole economic symposium, raising the possibility of a new round of quantitative easing to address a slowdown in the U.S. economy. October 18—In Deauville, France, German chancellor Angela Merkel and French president Nicolas Sarkozy walk on

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central bankers of the Group of 20 major world powers meet in Gyeongju, South Korea, where Bernanke explains the Fed’s expected new policy of quantitative easing to skeptical international policymakers. November 3—The Fed announces it will buy $600 billion in Treasury bonds in a second round of

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quantitative easing that will be widely known as QE2. It draws intensive criticism from American conservatives and the German, Chinese, and Brazilian governments. November 21—Ireland, under

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the ripple effects of the eurozone crisis on the British economy, the Bank of England policy committee unanimously agrees to an additional £75 billion of quantitative easing. October 19—At a farewell celebration for Trichet at the Frankfurt opera house, key players including Trichet, Draghi, Merkel, Sarkozy, and IMF chief Christine Lagarde

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pledge to buy bonds in unlimited amounts to combat market bets against the survival of the eurozone. September 13—The Fed announces a resumption of quantitative easing, pledging to continue buying bonds indefinitely unless the outlook for the job market in the United States improves or inflation becomes a threat. October 23

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back up to 0.25 percent and then to 0.5 percent. When the Japanese economy slumped again, Hayami’s BOJ took a different step: quantitative easing. “The BOJ had to do something to ease, but the governor did not want to do exactly the same thing, because it would be clear

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stop lending at all if rates fell too low. Instead, they joined the Fed and the Bank of Japan among those central banks experimenting with quantitative easing, or using newly created funds to buy longer-term government bonds in hopes of pushing more money out into the economy. They started with £75

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global markets in the first part of the year, even as the value of the pound had fallen due to the Bank of England’s quantitative easing policies, hiking the cost of imports. Additionally, a stimulus measure that had cut the value-added tax expired, meaning the purchase price of a wide

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focus on the problem we’re actually facing, not on the problem of our parents’ generation. Posen started voting for an extra £50 billion of quantitative easing at the October 2010 MPC meeting, and he became as consistent an advocate for easier money as Sentance was for tighter throughout 2011. Posen actually

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in the economy when short-term interest rates were already near zero. Ben Bernanke could explain all day long how this was different from the “quantitative easing policy” the Bank of Japan had tried a decade earlier. (Both central banks expanded their balance sheets, but the BOJ did so only by buying

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in the rarefied debates that went on inside the Eccles Building, though, it was a distinction without a difference. This being the second round of quantitative easing by the Fed, the approach adopted that November afternoon would soon be known around the world as QE2, whether Bernanke liked it or not. The

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-generated voices—whether they were in fact rabbits or bears or pigs or dogs was hard to say—engaged in a Socratic dialogue about “the quantitative easing” that had been launched by “the Ben Bernank” to benefit “the Goldman Sachs.” The video went viral; by mid-December, it had been viewed 3

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a dozen in total—Bernanke and his closest advisers had drafted a speech that laid out the decision of whether to do another round of quantitative easing as one of costs versus benefits. “As we return once again to Jackson Hole, I think we would all agree that, for much of the

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stubbornly sluggish. But after a summer in which economic data was pointing to a possible new recession and very low inflation, financial markets responded as quantitative easing shifted from a distant possibility in early August to a certainty in early November. Inflation expectations moved upward from 1.2 percent in August 2010

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that would allow the bank to ease policy without all the Sturm und Drang that would come with a QE3 program. The means by which quantitative easing affects the economy is called the portfolio balance channel. When the Fed buys $600 billion in Treasury bonds, as it did in QE2, the investors

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the duration of the Federal Reserve System Open Market portfolio” just sounds confusing to most people. It was, in a sense, a stealth form of quantitative easing—which was quite clear to the FOMC hawks. Richard Fisher, Narayana Kocherlakota, and Charles Plosser again dissented. For the most part, though, public criticism was

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side was Adam Posen, who believed that a decelerating economy and rising unemployment was the main risk. He had argued for a new round of quantitative easing, for Britain’s own QE2, at every MPC meeting since October 2010. The majority of the committee, led by King, elected for no change. On

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as joblessness rose. At the same time, he laid the groundwork for more bond buying by the Bank of England, playing down the idea that quantitative easing is some exotic form of economic sorcery. “I regard QE as a perfectly conventional monetary policy tool,” King said. “This is something we can do

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exactly what the MPC will do.” At the committee’s early September meeting, King and the other members seemed on the verge of instituting new quantitative easing, with wide consensus that the British economy was in grave danger from Europe and that inflation was dissipating. But as much as everyone seemed to

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-2013 date previously announced. The Bank of England, judging that inflation was falling as economic growth in Britain remained weak, returned to the well of quantitative easing in February, expanding its bond purchases by another £50 billion. The Fed undertook “Operation Twist 2” at its June meeting, swapping out another $267 billion

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high unemployment rate, low inflation rate, and the U.S. federal funds rate close to zero, it is understandable that the Fed has adopted the quantitative easing monetary policy.” Then Zhou explained the Chinese position: that because the dollar is the international reserve currency, the United States has a special responsibility, one

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Federal Reserve had rescued investment banks and insurance companies, maintained zero interest rates for four years and counting, and bought $2 trillion in bonds through quantitative easing. The Bank of England had joined the ECB in becoming uncomfortably entangled in politics and the Fed in vastly expanding its balance sheet. And all

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noted that central bankers again and again had taken discrete policy actions, but done little to shape expectations for the future more broadly. All the quantitative easing in the world, he argued, would have little effect in isolation. People across the American, British, and, to some degree, European economies were convinced that

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speech was more carefully considered than most that he gave, calibrated with the knowledge that the world was looking to the Explorers Room for guidance. Quantitative easing and the other tools the Fed had been using since the end of 2008 to support growth had helped, Bernanke argued, and the downsides some

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we hope to inspire may live under its shadow for a long time to come,” King said. He didn’t rule out a return to quantitative easing, should conditions warrant it. But his tone was a far cry from that of Draghi or Bernanke, who offered open-ended pledges to return their

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sets monetary policy for the United States, through a controversial decision to cut interest rates and push money into the flailing U.S. economy through “quantitative easing,” or buying bonds using newly created money. The series of financial bailouts during the crisis exposed Bernanke and the Fed to vociferous criticism from the

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U.S. Plan to Pump Money into System,” Associated Press, November 8, 2010. In a seven-minute YouTube video: David Weigel, “The Man behind the Quantitative Easing Cartoon Speaks!” Slate, November 22, 2010. “The Federal Reserve . . . is not a repair shop”: Kevin M. Warsh, “The New Malaise and How to End It

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and bailout, 125–28 Osborne, new role proposed by, 247–48 Panic of 1866 bailout by, 27–28, 32–34 political independence, 121–22 quantitative easing (2009), 238–41 quantitative easing (QE2), 334–36, 340 Soros/Druckenmiller and devaluation of pound, 72–74 strong action, lack of, 138–39, 387–88 value of pound

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on, 84–85, 88–89 currency swaps with ECB (2011), 349–50 Hayami as governor, 87, 89–92 post–World War II power of, 86 quantitative easing by, 90–91, 255 zero-interest-rate policy, 87–88, 90–92 Bank of the Estates of the Realm, 24 Bank of the United States

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-Obama relationship, 181, 183 personal traits, 116–17, 118–19, 176, 200 as “Person of the Year,” 151, 184 public statement, first, 5–6 and quantitative easing (QE2), 259–61, 264–76, 279–80 reappointment (2010), 181–84, 189–93 and TARP, 156–57, 160 Teal Book, 262 on tight money approach

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, 31 Bonds ECB bond purchases. See Outright Money Transactions (OMT); Securities Markets Programme (SMP) federal, as war financing, 37 government bonds, large-scale purchase. See Quantitative easing market, economic importance of, 370 rating AAA as safe, 103 Boxer, Barbara, 189 Boyle, Andrew, 59 Brainard, Lael, 346 Bretton Woods (1944), 63 Bridgewater Associates

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Insurance Corporation (FDIC), 77–78 Federal Open Market Committee (FOMC) attendees of, 118 housing bubble, central bankers fears (2005), 104–7 meetings, structure of, 119 quantitative easing (QE2), 254–55, 274–76 Teal Book, 262, 330 Federal Reserve Board of Governors, 44–45 creation of, 35–36, 44–45 decision-making body

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, 331–32, 340 for money market funds, 150–51 nominal GDP targeting as topic, 338–39 Operation Twist, 331–32 Operation Twist 2, 340 quantitative easing (QE1), 263 quantitative easing (QE2), 255–80 Term Auction Facility (TAF), 131–32 Federal Reserve Transparency Act, 175–76 Feingold, Russell, 189 Feinstein, Dianne, 191 Feldman, Gerald D

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criticism by, 234–35, 237–39, 242 Mansion House Dinner speech (2009), 233 Mansion House Dinner speech (2010), 247 Mansion House Dinner speech (2012), 232 quantitative easing amount, outvoted on, 238–41 successor to. See Carney, Mark Klobuchar, Amy, 198–99 Knickerbocker Trust Co., 41 Kocherlakota, Narayana, 196, 264–65, 330, 332

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, 237–39, 242 Lacker, Jeffrey, 196, 264, 275, 385 Lagarde, Christine, 229, 289 Lamont, Norman, 73 Lamont, Thomas W., 42 Large-scale asset purchases. See Quantitative easing Laws, David, 244 Lazear, Edward P., 147 Lehman Brothers collapse, 139–41, 205 no bailout for, 141–42, 143–45, 151–52 Lehnert, Andreas, 104

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emergency relief, 150–51 near collapse (2008), 147–48 Money Market Investor Funding Facility (MMIFF), 151 Money supply decreasing, and inflation of 1970s, 69–71 quantitative easing goals, 263 Monti, Mario positive steps by, 353 as prime minister, 342, 347, 348 Moreau, Émile, 55 Morgan, John Pierpont First Name Club meeting (1910

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, 385 Price increases. See also Inflation self-perpetuation of, 65–66, 134–35 Privatization Greece, 309–16 Italy, 319 Provopoulos, George, 201–2, 203, 215 Quantitative easing by Bank of England (2009), 238–41 by Bank of England (2011), 334–36, 340 by Bank of Japan (2000), 90–91, 255 by Fed

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(QE1), 263 by Fed, second round. See Quantitative easing (QE2) goals of, 238–39, 255 Quantitative easing (QE2), 255–80 Bernanke briefing in South Korea about, 273–74 economic rationale for, 259–61, 263–65, 267–70 effectiveness of

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), 131–32 Thatcher, Margaret, 72 Thomsen, Poul, 285, 309 Tipping point theory, 267–68 Tobin, James, 70 Treasury securities Fed large-scale bond purchase. See Quantitative easing liquidity of, 236 Tremonti, Giulio, 319 Trichet, Jean-Claude. See also European Central Bank (ECB) remedies background information, 12, 112–15 beginning crisis, view of

The Price of Time: The Real Story of Interest

by Edward Chancellor  · 15 Aug 2022  · 829pp  · 187,394 words

cent. This great monetary experiment ended in disaster (Chapter 4). Still, Law anticipates the policies of modern central bankers with their ultra-low rates and quantitative easing (asset purchases). By the nineteenth century, it was clear to some financial observers that speculative manias tended to coincide with periods of low interest rates

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, which brought about an immediate decline in interest rates and an end to the crisis.55 His actions constituted the world’s first experience of quantitative easing.fn9 In short, the ancient history of interest provides no strong support for any particular view as to how the rate of interest is formed

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growth falters, financial imbalances accumulate, and capital is misallocated. Bubbles form. Too much debt accumulates. After the crisis, central bankers tried out new monetary measures – quantitative easing, paying banks interest on their reserves, zero and negative interest rates, and various other innovations. They stamped on the gas pedal whenever the economy lost

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property consultant, commented: ‘What happened was that, for the first time, the cost of money in most of the cities was similar – you might say quantitative easing [has] levelled the global playing field.’4 Real estate brokers referred to the favoured destinations of the world’s super-rich as ‘golden concrete’.5

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than double the level a few months earlier. Fed staffers referred to ‘large-scale asset purchases’, but the rest of the world knew it as quantitative easing (QE). On 6 March 2009, the S&P 500 index reached a low of 666 – the number of the Beast. Investors had been put through

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is controlled, we have nothing to fear. Any departure from the bubble threatens a crisis. Extreme measures are adopted: negative interest rates, limitless amounts of quantitative easing and, in response to British’s voters’ wishes to leave the European Union, even a ‘Project Fear’. Too much is at stake to let the

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clear that unconventional monetary policies unleashed by the financial crisis had a profound impact on inequality. A Bank of England study (from 2012) estimated that quantitative easing boosted UK household wealth by more than £600 billion. As the top decile of households owned more than two-thirds of private assets, they benefited

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risks were being mispriced.9 The Fed didn’t merely encourage the search for yield by slashing interest rates. One of the explicit purposes of quantitative easing was to encourage Wall Street to take more risk. Investors who sold Treasury bonds and mortgage securities to the central bank were supposed to replenish

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holdings of yielding securities, such as Treasury securities and mortgage-backed securities, financed by very low-cost liabilities.’10 Central banking in the age of quantitative easing proved an extremely lucrative business. In 2015, the Fed earned profits of nearly $100 billion on its securities portfolio, which was financed by printing dollars

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, and the VIX remained lower for longer than ever before. Each of the Fed’s three rounds of quantitative easing took place at successively lower levels of stock market volatility.43 This was no coincidence. Quantitative easing, observed Kevin Warsh, a former member of the Fed’s Federal Open Market Committee, ‘works because we

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since the Fed was doing everything in its power to get investors to assume more risk. Chairman Bernanke got around the quandary by joking that quantitative easing worked in practice but not in theory. Central bankers denied that they were responsible for the collapse in long-term interest rates. One secular stagnation

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purchases.fn1 ‘Low yields, low carry, [and] future low expected returns have increasingly negative effects on the real economy … Perhaps zero-bound interest rates and quantitative easing programs are becoming as much of the problem as the solution,’ Gross wrote in the summer of 2013. Five years later, two American economists published

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a positive lending spread (net interest margin) to encourage them to advance loans.fn2 If banks don’t lend, they don’t create money either. Quantitative easing boosted asset prices and shrank credit spreads, but most of this newly created money wasn’t lent to consumers or businesses but was deposited by

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like what they saw. After the taper tantrum of June 2013, the President of the St Louis Fed (and FOMC member) James Bullard suggested that quantitative easing henceforth should be ‘open-ended’.fn6 Bullard was a former Fed ‘hawk’, who used to fret about extreme monetary policies. By this date, doves ruled

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that year. Low rates had well and truly begot lower rates. One way to keep monetary accommodation perpetually in place was to move the goalposts. Quantitative easing was originally instituted to restore order to financial markets during a period of panic – a modern extension of Bagehot’s lender of last resort rule

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, was that they had taken the wrong path. The Federal Reserve acted as the bellwether for other central banks. The timeline for the adoption of quantitative easing after Lehman’s demise runs from the Federal Reserve (November 2008) to the Bank of England (March 2009), coincident with the massive expansion of the

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banks provided them with an excuse to buy foreign securities with newly printed money. The Bank of Japan, which had been the first to initiate quantitative easing (in March 2001), later came up with ‘quantitative and qualitative easing’, to which it added ‘yield-curve control’.18 While interest rates in the United

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‘now serving as the funding currency for carry trades’.12 New York University economist Nouriel Roubini issued a starker warning. The combination of easy money, quantitative easing and a weakening dollar had produced the ‘mother of all carry trades’, said Roubini: But one day this bubble will burst, leading to the biggest

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the rest of the world and hence heightens the risk of build-up of financial imbalances.’42 The Fed’s policy of easy money and quantitative easing produced what were euphemistically called ‘spillover effects’ across emerging markets. Outbreaks of global financial turbulence from the taper tantrum of 2013 onwards coincided with monetary

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resisted the urge to borrow and spend.12 By the end of 2020, the US national debt was higher relative to GDP than in 1945. Quantitative easing made it easier for governments to run large deficits. But, from a financial perspective, this operation involved swapping long-dated government bonds for short-term

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. The Icelandic Counterfactual In the aftermath of the global financial crisis, central bankers asserted there was no alternative to their policy of slashing interest rates, quantitative easing and protecting banks from failure. Had they done otherwise, they claimed, unemployment would have reached Great Depression levels and inequality would have climbed even higher

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big to bail. Unlike several other central banks, the Icelandic Central Bank (ICB) didn’t receive dollar swaps from the Federal Reserve. There was no quantitative easing or interest-rate cuts. Instead, after the krona collapsed on the foreign exchanges (losing around half its value relative to the dollar), inflation took off

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Reached a Permanently Low Plateau?’, Presentation at Grant’s Conference, 10 October 2017. Brown, Brendan, A Global Monetary Plague: Asset Price Inflation and Federal Reserve Quantitative Easing (London, 2015). Brownstein, Andrew R., et al., ‘Mergers and Acquisitions – 2016’, Harvard Law School Forum on Corporate Governance, 10 February 2016; https://corpgov.law.harvard

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Yellen suggested that the Fed formally adopt a 2 per cent inflation target: Brendan Brown, A Global Monetary Plague: Asset Price Inflation and Federal Reserve Quantitative Easing (London, 2015), p. 149. 42. In November 2014, BOJ Governor Kuroda announced that ‘aiming at 2 percent inflation has become a global standard, and this

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/nationalbalancesheet/2019. 7. Nick Rigillo, ‘Denmark Faces “Out of Control” Housing Market’, Bloomberg, 21 July 2016. A 2015 report by Moody’s Analytics claimed that quantitative easing was fuelling housing bubbles across Europe; Kate Allen, ‘QE Feeding Europe House Price Bubble, Says Study’, Financial Times, 20 July 2015. 8. ‘Liar loans’ are

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decline in long-term interest rates was the primary cause of growing pension deficits. They also found a link between Bank of England asset purchases (quantitative easing) and the size of pension deficits. 41. Karen Brettell and Timothy Aeppel, ‘Buybacks Fueled by Cheap Credit Leave Workers Out of the Equation’, in ‘The

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of time. 130. Piketty, Capital, p. 172. 15. THE PRICE OF ANXIETY 1. Brendan Brown, A Global Monetary Plague: Asset Price Inflation and Federal Reserve Quantitative Easing (London, 2015), p. 133. 2. Arthur E. Monroe, Early Economic Thought: Selected Writings from Aristotle to Hume (Mineola, NY, 2006), p. 301. 3. Joseph Schumpeter

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in interest rates both helps banks, by raising the value of their securities, and hurts them by reducing their net interest margins. They suggest that quantitative easing actually increases the ‘reversal rate’ and that banks suffer more when low interest rates are maintained for a long period, thereby pushing up the reversal

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’, Bridgewater Associates, February 2012, p. 2. 12. See Goodhart and Pradhan, The Great Demographic Reversal, pp. 165–77. 13. Raghuram Rajan, ‘The Dangers of Endless Quantitative Easing,’ Project Syndicate, 2 August 2021. 14. Ian Brenner, The End of the Free Market: Who Wins the War between States and Corporations? (London, 2010), p

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‘active’ monetary policy in 1920s, 84, 85–8, 85†, 92–4, 96–8; and responsibility for inequality, 214–17; ‘Taylor Rule’, 116–17 see also quantitative easing and also entries for individual institutions central planning: in Bretton Woods era, 291, 292–5; Hayek’s The Road to Serfdom (1944), 295–6, 298

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; new insecurity, 211, 298 Erdogan, Recep Tyyip, 259 European Central Bank (ECB), 144, 145, 147, 239, 240, 293; inflation targeting, 119, 120, 122–3; and quantitative easing, 146, 241, 242; sets negative rate, 147, 192–3, 244, 299 European Union, 187, 241, 262 Eurozone, 124, 150–51, 226; and political sovereignty, 293

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; Operation Twist (2011), 131*, 238; parallel with US Forest Service, 154–5; and post-Great War inflation, 84; as the ‘price of leverage’, xxi–xxii; quantitative easing by, 12*, 76, 131*, 137, 175, 215, 228, 236, 238, 239–40, 241; raised rates announcement (2015), 138, 239; reaches ‘zero lower bound’ (2008), 243

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, 279, 285–6; inflation targeting in, 119, 122, 241; negative interest rates in, xxi, 29, 122, 224, 225, 242, 244–5; public debt in, 291*; quantitative easing in, 241, 242, 294; ‘retirement gap’ in, 198; zaitech practitioners, 106, 182, 185; zombification of economy, 145–6, 147 Jevons, W. S., 31, 95† Jews

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, 148; and negative interest rates, 174, 245; New York’s pencil towers, 209; post-2008 recovery in luxury real estate, 209–10, 212, 213; and quantitative easing, 292; skyscraper building in 1920s, 90; Turkish bubble bursts, 259–60; Xi’s ‘three red lines’, 310 protectionism, 261–2 Protestant Reformation, 26 Proudhon, Pierre

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-Joseph, xvii–xviii, xix, xxi, xxv, 9, 306 ‘public choice’ school, 286–7 Puerto Rico, 196 quantitative easing, 131*, 138, 236, 239–40, 263, 292; and ECB, 146, 241, 242; by Emperor Tiberius, 12; Fed’s rounds of, 175, 228, 238, 240; and

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for money to be lent out to borrowers offering the highest interest rate. fn9 It is curious to note that the chief beneficiaries of Tiberius’ quantitative easing were patrician families. As we shall see, this was also the case when the Federal Reserve revived the practice in 2008. 2: Selling Time fn1

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of Basel fn1 After 2008, the Federal Reserve signalled to the market its intended future interest-rate moves (forward guidance), acquired large amounts of securities (quantitative easing), and swapped its portfolio holdings from short- to long-date bonds (Operation Twist). All these actions were intended to lower long-term bond yields. fn2

The Lords of Easy Money: How the Federal Reserve Broke the American Economy

by Christopher Leonard  · 11 Jan 2022  · 416pp  · 124,469 words

at the modern Fed, a name that was intentionally opaque and therefore difficult for people to understand, let alone care about. The plan was called “quantitative easing.” If the program was enacted, it would reshape the American financial system. It would redefine the Federal Reserve’s role in economic affairs. And

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FOMC, which then debated behind closed doors. A big wall went up around the decision-making on money. The things that bothered Hoenig about quantitative easing were just as important to the American people as the things that bothered Williams Jennings Bryan. The FOMC debates were technical and complicated, but at

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t just keep rates pegged at the zero bound, but was now voting on the plan to go below the zero bound, with quantitative easing. Hoenig had fought against quantitative easing for months, and today he would lose that fight as well. Hoenig’s ride continued south toward the Fed headquarters, which were located

…

bank presidents Charles Plosser and Richard Fisher expressed concerns about it, as did the president of the Richmond Federal Reserve Bank, Jeffrey Lacker. But if quantitative easing was radical, Bernanke insisted that it was called for by extraordinary times. During the FOMC meeting in September, Hoenig offered his most condensed, straightforward

…

directly criticized the 0 percent interest-rate policy, explicitly warning that it might stoke asset bubbles. Now, during a public speech, Hoenig said that quantitative easing was akin to making a “deal with the devil.” This was not the polite language usually employed by FOMC members. This was a public condemnation

…

. These comments irritated Ben Bernanke, perhaps even more than Hoenig’s dissenting votes had irritated him. When the Fed gathered to vote on the quantitative easing plan in November, the two-day meeting began on an unpleasant note. Bernanke opened the meeting with something of a scolding for the gathered FOMC

…

. Now, on November 3, Tom Hoenig and the other members took their seats around the giant table and prepared to hold their final debate on quantitative easing. * * * “Good morning, everybody,” Bernanke said as he began the meeting. “We made an awful lot of progress yesterday. FOMC productivity is up,” he joked,

…

, who divided their attention among outlets that included National Public Radio, CNN, The New York Times, and MSNBC. Fox’s prime-time segment on quantitative easing reached several million viewers. It was presented by one of the network’s most popular personalities, the former radio show host Glenn Beck. His understanding

…

the opposite of broke, with trillions of new dollars injected into the financial system. The only important thing Beck got right was pointing out that quantitative easing would hurt people who saved money. But his speech overall was a significant tragedy. His broadcast helped set the agenda that conservatives cared about

…

in 2010. Conservatives cared about the Federal Reserve far more than liberals seemed to. On November 3, quantitative easing was the top story on the conservative Drudge Report website, which featured a headline written in big red letters that said: “BIG NEW PUMP.”

…

The Road to Ruin, Aftermath, and The Death of Money. These books, and other conservative coverage, helped to dampen criticism of the Fed and quantitative easing because the program’s critics looked like right-wing cranks. People like Rickards predicted the most catastrophic possible outcomes, like hyperinflation, but those outcomes never

…

This is my background,” Bernanke said. In 2010, Bernanke defended the unprecedented experiment that the Fed was undertaking. Pelley gave an accurate overview of how quantitative easing would work. But when he asked Bernanke about the possible downsides of the program, Pelley only focused on one thing: price inflation. “Critics of Bernanke

…

The money changed the world, primarily by changing the behavior of people and institutions that already had a lot of money. Each dollar created by quantitative easing put pressure on the dollars that already existed, like water pushing into an overflowing pool. This pressure was intensified by the fact that the Fed

…

, and outright opposition, to Bernanke’s plan. During the meeting in late July, about half of the voting FOMC meeting members expressed concerns about quantitative easing. Bernanke began to push hard against this opposition because economic growth remained weak, and the unemployment rate remained high, almost four years after the crash

…

zero for nearly three more years, an extraordinary escalation of the guidance. The second tool was “Operation Twist,” a bond-buying program similar to quantitative easing, but with one important difference. Operation Twist didn’t pump more cash into the banking system, but only sought to encourage more lending by pushing

…

Yellen was friendly, even jovial, when she pressed her views. But she was not in any way ambiguous. “Janet was the strongest advocate for unlimited” quantitative easing, Duke recalled. “Janet would be very forceful. She is very confident, very strong in promoting the point of view.” Yellen and Bernanke were convincing, and

…

interest-rate cuts, that could be imposed and then quickly withdrawn as conditions changed. The truth turned out to be the opposite. The distortions from quantitative easing were deep and long-lasting, and the program, once employed, was essentially never-ending. These forecasting errors were not an isolated incident. Central banks

…

around the world consistently misled themselves about the effects of quantitative easing. The banks overestimated QE’s positive impact on overall economic output, when compared against studies conducted by outside researchers, according to a 2020 study by

…

the National Bureau of Economic Research. And central bank researchers who reported larger effects from quantitative easing tended to advance faster in their careers, the study found. This could have been due to the fact that the researchers reported to the

…

that lowering general market rates will stimulate much credit expansion and spending.” Sandra Pianalto, president of the Cleveland Fed, said that another round of quantitative easing would not help as much as the earlier rounds, and that it would be hard to end once it started. These arguments were tame compared

…

were unwavering. They wanted the FOMC to impose discipline on the program and cut back purchases. Stein gave public speeches about the inherent risks of quantitative easing. Both Powell and Duke continued to pressure Bernanke during FOMC meetings. Eventually, Bernanke reached a compromise with the Three Amigos. After the meeting in

…

the first Fed chairman to give regularly scheduled press conferences. He began the practice in April 2011, to help quell the political backlash that followed quantitative easing. “After the blowback that greeted our introduction of QE2 in November 2010… we needed to do more than ever to explain our policies clearly

…

of financial traders staring at television sets across the world. Bernanke started with a prepared statement, and in the midst of it he said that quantitative easing was essentially temporary. The Fed would likely taper off its purchases if growth remained strong, and would consider ending the program around June 2014.

…

from buying leveraged loans because they were considered somewhat opaque and risky. This changed in 2010, when the Federal Reserve began its second round of quantitative easing and kept interest rates pinned at zero. When the Fed pumped trillions of dollars into the banking system, and harshly disciplined anybody who tried

…

. None of this should have been surprising to senior leaders at the Fed. In 2013, while the FOMC was overseeing its largest round of quantitative easing yet, the Dallas Fed president Richard Fisher explicitly pointed out that the policy would primarily benefit private equity firms, like Jay Powell’s former employer

…

the company soon became a typical example of what was happening across corporate America as all the cheap money came flooding into the system through quantitative easing and ZIRP. This strategy would prove to be wildly profitable for company owners and executives. Todd Adams, for example, earned a respectable $2.5

…

of the regulatory agency charged with maintaining stability in the U.S. banking system, the FDIC. It had been years since Hoenig had warned that quantitative easing and ZIRP would cause a massive misallocation of resources, increase financial risk, and primarily benefit the rich, who owned assets. Now, as a bank

…

before taxes and other costs). It ended up equaling about six times as much. The optimistic assumptions were overlooked. The money had to go somewhere. Quantitative easing was designed and initiated with the specific goal of inflating stock market prices. The plan worked. The value of stocks rose steadily during the decade

…

search for yield pushed money into the debt of developing nations. When the McKinsey Global Institute tried to track the flow of dollars created by quantitative easing, it discovered that billions of those dollars flowed to developing nations like Mexico, Poland, and Turkey. These countries were considered a bigger credit risk

…

like Germany and Denmark, did the same, as did the European Central Bank. The idea was that negative rates would have the same effect as quantitative easing. Instead of incentivizing investors to reach for risky yields, the central banks of Europe literally punished investors, financially speaking, who saved money. The negative

…

. Credible arguments were made that the process would be completed by 2015, meaning that the Fed would have sold off the assets it purchased through quantitative easing, and would have drained virtually all the excess cash reserves out of the banking system. This never happened. Instead, the bank decided to simply

…

defend the very policies that he had been warning about internally since he had become a Fed governor. He said that “unconventional policies,” such as quantitative easing, were largely responsible for America’s economic growth, and that the critics of those programs had been proven wrong. “After I joined the Federal

…

with similar actions from other central banks. In December 2018, the European Central Bank followed the Fed’s lead and ended its own version of quantitative easing. The tightening financial conditions exposed the rot that had formed in global debt markets. China was a particularly instructive example. It was suffering from

…

autopilot, and had been essentially halted, but the FOMC had nonetheless withdrawn some of the extraordinary interventions of the Bernanke era. When the Fed reversed quantitative easing, it drained more than $1 trillion of excess cash out of the banking system. Excess bank reserves—meaning the level of cash that banks

…

programs that we deployed after the financial crisis.” Powell was saying that the Fed was going to do something that appeared to be quantitative easing but was not, in fact, quantitative easing. The key difference seemed to be the Fed’s intent. The Fed wasn’t pumping money into bank reserve accounts to stimulate

…

banks that made risky bets. OPEN MARKET OPERATIONS: The trading operations through which the Fed actually controls interest rates or achieves other policy goals like quantitative easing. The operations are conducted by a trading group based at the New York Federal Reserve Bank who buy and sell assets like U.S.

…

to be on the list, and it periodically removes or adds dealers. QE: Slang term for quantitative easing. QUANTITATIVE EASING: An experimental program the Fed first implemented during the crash of 2008. The goal of quantitative easing is to flood Wall Street with new cash at a time when interest rates are low in order

…

almost $4.5 trillion to a little less than $3.8 trillion. Then the financial system short-circuited. The Fed halted tightening and eventually resumed quantitative easing, boosting its balance sheet above $8 trillion. RESERVE ACCOUNT: The account that banks hold inside the Federal Reserve. The reserve accounts discussed in this

…

System, at the Federal Reserve Bank of Kansas City Economic Symposium, Jackson Hole, Wyoming, August 27, 2010. The basic mechanics and goals of quantitative easing: This description of quantitative easing is based on the author’s interviews with current and former Federal Reserve officials, financial traders, financial analysts, and senior members of the New

…

107. These comments irritated Ben Bernanke: Bernanke, The Courage to Act (New York: Norton, 2017), 485–92. When the Fed gathered to vote on the quantitative easing plan in November: Transcript of the meeting of the Federal Open Market Committee, November 2–3, 2010. “Good morning everybody,” Bernanke said: Ibid. CHAPTER

…

six current and former senior officials at the New York Federal Reserve Bank, 2020–2021, speaking on background. Three of these officials directly implemented the quantitative easing program. To understand the effects of ZIRP: Author interviews with financial traders, on background, 2016–2020. The author is particularly indebted to one trader

…

Rate Hikes in 2015,” Wall Street Journal, December 17, 2014; “Policy Normalization Principles and Plans,” Federal Reserve press release, September 17, 2014; Neil Irwin, “Quantitative Easing Is Ending. Here’s What It Did, in Charts,” New York Times, October 29, 2014; Michael S. Derby and Jon Hilsenrath, “Fed’s Dudley: Still

…

2, 2017; “Trump’s Fed Chair Choice Largely Down to Powell or Taylor,” Washington Post, October 26, 2017; “US Federal Reserve Calls Historic End to Quantitative Easing,” Financial Times, September 20, 2017. It was unclear, at first, what Trump’s victory: Thomas Hoenig, interviews with author, 2020–2021; Ryan Tracy, “FDIC

…

Powell: “Timelines of Policy Actions and Communications: Policy Normalization Principles and Plans,” Federal Reserve Board, February 22, 2019; “US Federal Reserve Calls Historic End to Quantitative Easing,” Financial Times, September 20, 2017; Jeff Cox, “Janet Yellen Calls Stock Market, Real Estate ‘High’ in Last Interview Before Exit as Fed Chief,” CNBC.

…

search function. Adams, Todd A., 186–88, 191, 192, 194, 195, 198 AIG, 23 Airbnb, 297 allocation of money, 19, 20 allocative effects of quantitative easing, 27, 28 of zero bound, 19, 20, 27 American Banker, 209 American Enterprise Institute, 18 announcement effect, 134 Apollo Management, 168–70, 172–74, 180

…

compared with, 222 Powell’s meeting of, 200 predictions and warnings of, 19, 34, 200, 222, 258, 302 quantitative easing critiques of, 27–28, 31–33, 62, 112, 120 quantitative easing publicly condemned by, 29, 34 quantitative easing vote of, 3, 8–11, 18, 21, 32, 34, 105, 107–9, 112, 258, 280 reputation of,

Currency Wars: The Making of the Next Gobal Crisis

by James Rickards  · 10 Nov 2011  · 381pp  · 101,559 words

and lending freely. Eventually rates reached zero, and the Fed appeared to be out of bullets. Then, in 2008, the Fed found a new bullet: quantitative easing. While the Fed describes the program as an easing of financial conditions through the lowering of long-term interest rates, this is essentially a program

…

limited to the U.S. economy, that would be one thing, but they are not. The effects of printing dollars are global; by engaging in quantitative easing, the Fed has effectively declared currency war on the world. Many of the feared effects of Fed policy in the United States are already appearing

…

, no one was yet using the term “currency war”—that would come later—but still all the signs were there. The Federal Reserve’s first quantitative easing program, so-called QE, had begun in November 2008 with the not so hidden goal of weakening the dollar on foreign exchange markets. The Fed

…

sort of chapter in a currency war.” Janet Yellen, Vice Chair of the Federal Reserve, commenting on quantitative easing, November 16, 2010 “Quantitative easing also works through exchange rates.... The Fed could engage in much more aggressive quantitative easing . . . to further lower . . . the dollar.” Christina D. Romer, former Chair of the Council of Economic Advisers, commenting

…

on quantitative easing, February 27, 2011 Three supercurrencies—the dollar, the euro and the yuan—issued by the three largest economies in the world—the United States, the

…

if necessary, and earned Bernanke the sobriquet “Helicopter Ben.” Bernanke’s 2002 speech was the blueprint for the 2008 bailouts and the 2009 policy of quantitative easing. Bernanke spoke plainly about how the Fed could print money to monetize government deficits, whether they arose from tax cuts or spending increases, saying:A

…

war. Like winners in many wars throughout history, the United States had a secret weapon. That financial weapon was what went by the ungainly name “quantitative easing,” or QE, which essentially consists of increasing the money supply to inflate asset prices. As in 1971, the United States was acting unilaterally to weaken

…

2009, and its successor, promptly dubbed QE2, was dropped in late 2010. The impact on the world monetary system was swift and effective. By using quantitative easing to generate inflation abroad, the United States was increasing the cost structure of almost every major exporting nation and fast-growing emerging economy in the

…

world all at once. Quantitative easing in its simplest form is just printing money. To create money from thin air, the Federal Reserve buys Treasury debt securities from a select group

…

was the conventional theory. In a globalized world, however, exchange rates act like a water-slide to move the effect of interest rates around quickly. Quantitative easing could be used by the Fed not just to ease financial conditions in the United States but also in China. It was the perfect currency

…

war weapon and the Fed knew it. Quantitative easing worked because of the yuan-dollar peg maintained by the People’s Bank of China. As the Fed printed more money in its QE programs

…

inflation and will take countermeasures to prevent a loss of wealth. The U.S.-Chinese currency war is just getting started, and the Fed’s quantitative easing makes it entirely plausible to say the United States fired the first shot. The clearest exposition of Chinese thinking on financial warfare is an essay

…

dislocations. The fear is also that China could use this financial leverage to sway U.S. policy in areas from Taiwan to North Korea to quantitative easing. These fears are dismissed by most observers. They say that China would never dump its Treasury securities because it has far too many of them

…

not required to revalue its assets to market value. This situation will come to a head when it comes time to unwind the Fed’s quantitative easing program by selling bonds. The Fed may ignore mark-to-market losses in the short run, but when it sells the bonds, those losses will

…

day as it piled more leverage on its capital base. By getting permission from Congress to issue new Fed bonds, the Federal Reserve could unwind quantitative easing without having to sell the existing bonds on its books. Sales of the new Fed bonds would be substitutes for sales of the old Treasury

…

to affect. Here was Bernanke’s entire playbook—keep interest rates at zero, devalue the dollar by quantitative easing and manipulate opinion to create fear of inflation. Bernanke’s policies of zero interest rates and quantitative easing provided the fuel for inflation. Ironically, Bernanke’s fiercest critics were helping his plan by incessantly sounding

…

by government spending and easy money rather than by private sector consumption and investment. This led to a political backlash against further deficit spending and quantitative easing. The increased debt from the failed Keynesian stimulus became a cause célèbre in the currency wars. These wars were primarily about devaluing a country’s

…

, these are still the dominant paradigms used in public policy when economic growth falters. One need look only at the Obama stimulus and the Bernanke quantitative easing programs to see the hands of John Maynard Keynes and Milton Friedman hard at work. This persistence of the old school is also one driver

…

push the dollar down . . .” Wall Street Journal, “Fed’s Yellen Defends Bond-Purchase Plan,” November 16, 2010, http://online.wsj.com/article/SB10001424052748703670004575617000774399856.html. 98 “quantitative easing also works through exchange rates . . .” Christina D. Romer, “The Debate That’s Muting the Fed’s Response,” New York Times, February 26, 2011, www.nytimes

…

Exchange and SWF investments in U.S. Tiananmen Square protests of 1989 U.S.-China bilateral trade relations U.S.-Chinese currency war U.S. quantitative easing programs in and U.S. Treasury debt U.S. Treasury holdings See also yuan, Chinese China National Offshore Oil Corporation China-U.S. Strategic Economic

…

own balance sheet and IMF IOUs to the Treasury as lender of last resort and management of unemployment mandates of mercantilism compared to and monetarism quantitative easing program Financial Crisis Inquiry Commission financial economics financial war game financial warfare strategy First National Bank of New York First National City Bank of New

…

system Plaza Accord, 1985 Poland Pompidou, Georges Portugal price-gold-flow mechanism price-specie-flow mechanism primary dealers private enterprise prospect theory protectionism Putin, Vladimir quantitative easing (QE) Ray, Chris Reagan, Ronald real estate bubble of 2002 to 2007 recessions, U.S. 1970s to 1980s of 2001 of 2007 See also Panic

…

dollar-yuan exchange rate exchange stabilization fund Federal Reserve IOUs to on gold exports gold reserve, increased value of and 1930s nationalization of gold mines quantitative easing and Treasury bills SWFs and Treasury bills Treaty of Versailles Tripartite Agreement of 1936 Tversky, Amos twilight of sovereignty Tymoshenko, Yulia UBS unemployment United Kingdom

…

Gold Pool military monetarism and U.S. economy 1930s bank failures and bank runs 1930s deflation and gold devaluation Nixon’s New Economic Policy, 1971 quantitative easing policy rebalancing plan start of Great Depression stock market crash of 1929 support of euro and Tripartite Agreement of 1936 2008 to 2010 stimulus plans

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