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Comment by dools | Hacker News Reader

QE has no impact on inflation because loan origination is not reserve constrained, because banks can always use their government securities as collateral

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> QE has no impact on inflation

This is the most false statement ever.

Anything that increases the money supply will increase inflation.

> Anything that increases the money supply will increase inflation.

Except we have actual numbers and history to prove that false....

Source? Did we not have rapid asset inflation since QE started in 08? Inflation pops up in all sorts of ways, not just blanket across the board.

Typically people mean core goods (CPI) when they say inflation not stocks and crypto

If only people could pay core goods CPI to live and house themselves!

Umm… Housing? Energy?

CPI includes all that

Here are the numbers to prove it true https://fred.stlouisfed.org/series/WM2NS

What does this graph prove exactly? It goes up steadily for decades where there weren't any inflation, and then had a sudden bump 2 years before the inflation started.

Inflation was caused by the massive fiscal spending (stimmies) not the FED

The fed printing was done to pay for the stimmies. Government spends more than it takes in in taxes so it borrows. But it borrows so much that the market won't lend it the amount it needs to borrow at the rates it wants to borrow at. So the fed prints money and lends it to the government. They call this "quantitative easing" so they don't have to say money printing. Look at this chart of treasuries held by the fed. Notice how it mirrors the money supply. https://fred.stlouisfed.org/series/TREAST

That's a graph that shows M2, not inflation. QE does have an impact on M2, but bank lending behaviour is not directly reserve constrained, so it has little impact on inflation.

QE had a big impact on inflation because creating loans typically requires a willing buyer/underwriter at a given rate, which is a natural limiter.

When the gov’t is willing to buy/underwrite loans with minimal standards or sight unseen at lower rates, it artificially accelerates loans and lowers the cost of money - and increases the money supply and velocity of money in the economy.

"The most extreme growth occurred in September 2001, January 2009, and January 2012, when the rate of M2 expansion topped 10%. These accelerated periods coincided with recessions and economic weakness, during which expansionary monetary policy was deployed by the central bank."[0]

This expasionary monetary policy failed to stimulate the economy, which is predictable to anyone who understands that banks having bonds vs reserves has virtually no impact on their lending behaviour. Bonds are, for all intents and purposes, as good as cash.

[0] https://www.investopedia.com/terms/m/m2.asp#toc-the-bottom-l...

By the traditional definition of inflation, QE is inflation.

No, by the non-orthodox definition of inflation espoused by Austrian economists, QE is inflation. Most people are referring to price level increases when they refer to inflation, and a more correct definition of inflation is sustained real price level increases over time rather than one off price adjustments.

*assuming the government can honor them. The government is underwater and out of credit.

A government can never run out of a currency it issues

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