Not QE

Update Oct 11: The Federal Reserve announced that their repo operations,[1] which began on Sept 17 and were originally set to end yesterday and then extended until Nov 4, will continue through early 2020. Additionally, short term treasuries will be bought (not QE) through the second quarter of 2020, starting with $60 billion the first month.[2]

***

Federal Reserve Chairman Powell announced that the Fed would begin QE (money printing).

Via CNBC,[3]

“The Federal Reserve will soon start growing its balance sheet again, a response in part to the jolt to overnight lending markets in September, Chairman Jerome Powell said Tuesday.

How the Fed will go about expanding the securities it holds will be explained in the coming days, though Treasury bill purchases will be involved, the central bank chief said during a speech in Denver, though Powell stressed the approach shouldn’t be confused with the quantitative easing done during and after the financial crisis.

‘This is not QE. In no sense is this QE,’ he said in a question and answer session after the speech.”

QE is where the Fed prints (inflates) money and buys treasuries to lower interest rates.

“Not QE” is where the Fed prints (inflates) money and buys treasuries to lower interest rates.

The inflated money supply devalues the dollar. “Not QE” is QE.

Ludwig von Mises predicted this moment in his 1949 Magnus Opus, Human Action on page 570,[4]

“The wavelike movement affecting the economic system, the recurrence of periods of boom which are followed by periods of depression, is the unavoidable outcome of the attempts, repeated again and again, to lower the gross market rate of interest by means of credit expansion. There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as the result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.”

[1] https://www.hamiltonmobley.com/blog/risky-debt

[2] https://www.cnbc.com/2019/10/11/the-fed-is-extending-its-overnight-funding-operations-through-january-2020.html

[3] https://www.cnbc.com/2019/10/08/powell-says-the-fed-will-start-expanding-its-balance-sheet-soon.html

[4] https://mises-media.s3.amazonaws.com/Human%20Action_3.pdf