Why QE is a lock
We don’t have a take on the Super Bowl spread, but there is one sure bet out there.
Dear readers,
Last night, while teaching the monetary history and plumbing portion of my fixed income course at USC, I brought up the classic example of the Roman Empire devaluing its currency by replacing a coin containing 98% silver with one containing only 5% silver over the course of centuries. Through this process, the state is stealing money from its lenders because when it pays back debt in coinage, each coin is worth less than each coin borrowed (due to the reduced precious metal content). “Isn’t this what the Fed does when it creates currency during QE?”, a student asked. An insightful question without a straightforward answer. It inspired me to write more about today’s QT period and why, mathematically speaking, I don’t see an alternative to eventual QE. Got bitcoin?
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QE is an asset swap
First things first, let’s address if QE can be described as “printing money.”