Quantitative Easing and the Purchasing Power of Fiat Currency

Quantitative easing is an unconventional monetary policy used by central banks to stimulate the economy when standard monetary and fiscal policy, such as lowering interest rates or taxes, becomes ineffective. A central bank implements quantitative easing by buying financial assets from commercial banks and other private institutions, increasing the monetary base. It sounds quite technical and its been administered by professionals so the risks must be limited…right?

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The Japanese have been pumping money into their economy, via QE since the asset bubble collapse in the 90’s. It’s led to a period of stagflation in their economy that is unprecedented but the central banks like the Fed, Bank of England and ECB continue down this path. Why? They have no other option, other than raise interest rates but by doing that the government debt would become unsustainable sooner rather than later. That’s not how these kick the can politicians and bankers work though.

So with all of this extra money being pumped into the banks, its good for the economy, right? Nope, wrong again. I can’t find evidence of this happening at the Bank of England but its happening at the Fed. Our economies are based on credit, small and medium sized businesses need loans and cashflow in order to operate but the Fed, under Ben Bernanke and his infinite wisdom has decided to pay banks not to risk their money. Section 128 of the Emergency Economic Stabilization Act of 2008 allows the Federal Reserve to pay interest on “excess reserves” that U.S. banks send to the Fed.

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Therefore the banks, especially those classified as TPTF can just send their cash to the Fed and collect the interest risk free. A brilliant piece of policy to stifle, not help the entrepreneurs and small businesses an economy relies on to get it out of a depression. You couldn’t make this up, it’s disgusting that the mainstream media are not picking up on this and holding these people accountable. It regretfully shows the system is gamed not for you or me but the few at the top.

So quantitative easing and printing fiat currency increases money supply and therefore reduces the value of said fiat. What does that mean for you and me?

For the UK the purchasing of £1 has fallen significantly through QE and inflation, this is not good for the common man

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The same for the Fed.

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And finally fiat currencies measured against gold.

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Quantitative easing is a policy to prolong the inevitable, the demise of fiat currencies. Let your friends and family know. Keep safe.

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One thought on “Quantitative Easing and the Purchasing Power of Fiat Currency

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