It might also be worth noting that the current practice of quantitative easing incorporates a potential corrective mechanism for inflation that the traditional monetary expansion associated with historical episodes of hyperinflation did not.

When central banks engage in quantitative easing, they purchase financial assets (typically government bonds, corporate debt, stocks etc.) that can in principle be sold back to the market at a later date. When an initial central bank purchase is made, the amount of money in circulation increases, but that increase can be reversed if the asset is sold. If the asset is sold at purchase price, there is no net change in the money supply; if it is sold at a loss there is an increase proportional to the loss, and if it is sold at a profit there is a decrease proportional to the profit.

If money creation is instead used to, for instance, purchase consumable goods and services or pay wages (this is typically what happens when hyperinflation occurs), then the monetary expansion cannot be reversed in the same way — some other mechanism like tax rises would be needed.

The economic behaviour of the recipients of the newly created money is also significant. If consumers are the recipients then, all else being equal, the prices of the goods and services that consumers buy may be expected to rise. If banks and large corporate investors are the recipients of the money then, all else being equal, the prices of the things those organisations buy (principally investments like bonds and stocks) may rise.

My understanding is that the experience with quantitative easing has been that it has caused a kind of price inflation, but primarily the prices affected have been those of the assets purchased by institutional investors (i.e. stock markets have risen, and bond yields and interest rates in general have been suppressed).

> The economic behaviour of the recipients of the newly created money is also significant. If consumers are the recipients then, all else being equal, the prices of the goods and services that consumers buy may be expected to rise.

Furthermore, even when consumers are the recipients, inflation is not necessarily to be expected when that money is replacing lost income. In that case, spending (and thus demand) remains the same. Inflation would not occur unless there was a simultaneous drop in supply.

People pointing at Venezuela or Zimbabwe as cautionary tales of money printing often ignore the decades of economic mismanagement that preceded the money printing.

Are you implying that the US and the UK havent had decades of economic mismanagement? Ooh boy, that is rich.

> Ooh boy, that is rich.

Noblesse oblige.

"that can in principle be sold back to the market at a later date"

What's the material difference, in your opinion, between the threat of the central bank selling back existing government bonds, and the government just creating new bonds of precisely the same type.

There is no money in circulation. All that has happened is that the type of savings has changed - from holding government bonds to holding bank deposits.

And that just means the term and interest rate has changed on the financial instrument.

The fundamental problem is the belief in interest rates and how they work is wrong in practice. People hold savings for a myriad of reasons.

> What's the material difference, in your opinion, between the threat of the central bank selling back existing government bonds, and the government just creating new bonds of precisely the same type.

In the former case (where the central bank sells back government bonds it has previously purchased from investors as part of a quantitative easing scheme), all else being equal, money is withdrawn from circulation and the total stock of government debt remains the same.

In the latter case (where the central bank does not sell any of the government bonds acquired from investors and the government issues new bonds of equal value instead), the total stock of government debt increases, and assuming the government spends the money raised from selling the new bonds as is usually the case, the amount of money in general circulation remains the same (though investors in government bonds have less of it, to the extent that they are not net recipients of the increased government spending).

This is assuming the simplest model; in practice of course, the details will differ consequentially depending on how these processes operate in different jurisdictions. For example, to the best of my knowledge the central banks I'm most familiar with are required to remit interest payments on government debt back to their national treasuries; and in the European Union, direct central bank monetisation of government debt is supposed to be illegal — things like this complicate the picture in reality.

I can see from your other comments that you are well-informed about these details, so I would defer to you there.

I think its a good summary, but one should stress a key point:

All this QE, aka money printing, can only be removed in a "nice" way if the additional liquidity is to a larger extend used to create additional value rather than consumption.

De facto, most of the liquidity is consumed without added value (Zombie companies, certain government expanses,...)

This can only work for a finite amount of time.

> This can only work for a finite amount of time.

The economy of Japan is living proof that it can work for a very long time, with no clear end in sight. Nobody wants to be the one push the "reset" button.

>Money is being printed to maintain liquidity, at the cost of inflation, because a liquidity crisis is considered worse than inflation.

I think this is sort of right, sort of wrong. It's not so much as liquidity in so much as preventing deflation. Though yes we are in a liquidity trap at the moment.

https://en.wikipedia.org/wiki/Liquidity_trap#Origin_and_defi...

The central banks especially several in Europe lost control of their monetary base. They have gone to negative interest rates + legally requiring pensions funds and similar to purchase these bonds. In other words the governments are robbing the retirees.

The government's goal right now is to prevent the recession from becoming a depression. In fact everything has aligned to make this recession turn into a depression. The only reason it doesnt appear to be a depression is because of expansionary monetary policy.

>Your (proto-Austrian?) view of economics has long been disproven empirically, as well as theoretically (monetarism and subsquent). Its only purpose now is to sell gold/silver to people who need an oversimplified economic theory that fits their world view.

Disproven empirically? Could you provide a link for me to read on this? I do understand that Austrian school is criticized and not generally used but I dont feel like it has been disproven.

What's wrong with a massive wave of bankruptcies, exactly? Proper bottom-up restructuring seems to me like a good way to stimulate a more robust economy at the expense of some temporary resettlement pains. Not to mention the erasure of a catastrophically building debt which is largely a product of mass-manipulation driving people to desire things which they do not need which leads them to dissatisfaction and leaves them vulnerable to squeezes which HR takes advantage of with the panopticon and massive insecurity. The culture needs shook't. The status quo is broken. This is just a bandaid to maintain spreadsheets while 99% of people take a spanking for a system that works against the human condition.

I'm gonna have to take "Chesterton's fence" sort of position there.

Sure, there's a chance that whatever arises from the ashes is going to be more efficient than whatever preceded it. There's also a chance that whatever is there right now is about as good as whatever the new thing will inevitably converge to.

Either way, blowing it all up at once seems unwise.