If QE isn’t money printing, then what is?
I didn't understand how commercial bank created money to fund government deficit ?
Moreover, say Bank A lend to Paul $1,000 for which it needed capital of $10. So on asset side bank has $1,000 and on liability side it has $10 of equity. Ain't $990 of deposit or wholesale debt etc required to fund the loan?
Can you suggest a book that discusses such topic on money creation, banking system, central bank and their interaction?
Just got around to reading this, thanks Peter. We are facing a (kind of) similar situation in Argentina, where inflation has currently reached 100% YoY, and the CB has net income losses, reaching a point where increasing the benchmark rate only leads to higher inflation. Highly unlikely the US reaches that point though.
Thanks for sharing this with us! Super interesting post. I'm only an amateur in the subject of financial markets and I don't fully understand how the commercial banks create money while funding the gov. You wrote: "The banking system funded the government, as it always does, creating money in the process." I though that when Treasury issues new debt it drains the market from cash as the banks need to have some source of funding to purchase USTs. Could you point me to any good source where I could read about the process in which banks fund gov creating new money? Or maybe you wrote about it somewhere?