Excuse me, but when Federal Reserve conducts QE and buys 1 trillion of freshly issued government debt, what does it have in common with actual savings of the private sector? Who saved that paltry trillion? :)
The government get a trillion of debt but also a trillion worth of assets that pay their cost back, eventually.
I claimed that it isn't inflationary, and your example doesn't show any clear inflationary pressure.
Government securities generally represent savings because the Governments are generally legally required to match deficit spending with bonds, etc. QE was a bit of a departure from the norm (perhaps only temporarily though) and shows what modern monetary theory says - that it isn’t really necessary, not is it necessarily inflationary (this is because all spending carries inflationary risk, and inflation has to do more with aggregate demand than money supply etc. - and the most generally anti-inflationary force is actually taxation)
The Federal Reserve's governors are appointed by the President and confirmed by the US Senate, and it derives all its authority only from the Federal Reserve Act. The organisation is accountable to the Government Accountability Office as well.
Most central banks though are just directly owned by the Government of the country, even if they are meant to operate independently.
The "independence" of central banks is generally a bad thing though - the point is supposedly to "depoliticise" them but really it's just an attempt to remove any democratic control of them.
Also, for your information, the GAO audits are anything but accountability. After finally getting the GAO audit part passed in 78 there were so many limitations on thier audits as to make them so piecemeal they are more of a rubber stamp than anything. (Not to mention a few times when it got out the Fed destroyed source documents)
Don't call something a common misconception when you don't have a more solid understanding of the subject please. The common misconception is that they are federal, not the other way around.
My thinking is that QE is quite inflationary.I think that after 2008 crisis we were expected to have a long period of strong deflation (let's say, with prices falling 4% each year, for 8 years straight), but QE reverted that and we had 1% of inflation or something like that instead. So, formally we are in "mild inflation" ground, but in fact the QE effect was quite dramatic. We just can't observe it because we don't have a "control group economy".
It is considered to have inflated prices of certain financial assets though (shares etc.)
BTW it's not true at all that economic growth requires a surplus. In fact often the case is the opposite. I strongly recommend people who want to understand this read up on Modern Monetary Theory. Once you understand how this stuff really works (yes Banks create money they are not dumb intermediaries sand fractional reserve banking is a myth) it will help a lot to understand much of what is not reported on the news.
That's where things get interesting.
Let's imagine, for a simplicity sake, that there are 3 types of assets -- government debt, apple stocks and tesla debt.
If I'm sitting on my 1 trillion of government debt and I want actually switch to apple stocks (or maybe just get dollars and eat pizza and drink margaritas), I need to sell it to someone who will put his trillion into government debt. So, for me to "untie" my 1 trillion in government bonds and free it for consumption, someone has to "tie" his trillion dollars into it.
Now, fed enters the market and buys that 1 trillion from me as a part of QE. It does not need to sell his apple stocks or delay consumption and save that 1 trillion.
I now have dollars in my account, and can use it to buy, say, trillion of tesla debt, because I love Elon Musk.
Musk, in turn, can look at the market and observe that it has a huge appetite for tesla debt, and it was not the case one year ago. So maybe it make sense to issue one trillion dollars worth of bonds and build Gigafactory-2 and another car factory, and he does exactly that.
Are we still sure that when Gigafactory-2 is being erected and people are hired for a second car factory, "QE have no real economic impact"? It's not obvious to me.
I'm pretty sure it does have an economic impact on growth. The argument according to which it wouldn't make sense when you're at or near potential GDP, but when you fall enough below that - as in a big recession - increasing the money supply definitely has an impact. Then, it can be argued if the impact is good or bad in the long term - eg: will people create useful Gigafactories, or will they build unsustainable McMansions? But the impact is there.
(BTW in reality the market for government debt is very liquid. What you're really describing hate it's liquidation risk. It becomes an issue for more think traded instruments but not for bonds.)
And if Fed will go out and just buy the whole outstanding float of GOOG, AAPL, TSLA, FB and NFLX with freshly minted money, it would be, bingo, "swap of one asset for another".
Don't you think that asset swap like that will somehow affect the general economy?
EDIT: damn, let's go _really_ extreme. Fed can basically swap all the government debt with dollars. All the 21 trillion of it, in a single asset swap. Click-click and boom, USA is debt free, no more interest payments, hooray. Dont you think such swap will have some real-life repercussions? If it will, how it's different from QE?