08-20-2016, 06:40 PM
Thanks Chester :). That has always been my understanding of quantitative easing: printing money out of thin air which increases the supply and decreases the value.
However, this article seems to give quantitative easing a new definition: that the Fed buys securities and gives cash back to investors. This article seems to be discussing a balance between assets (securities/treasuries, etc.) and cash reserves. I think it's saying that just because you turn in your security into a bank and get cash for it it doesn't mean that there's really been an increase in the money supply (ie. inflation). The reason is because the person who had securities is usually not a person to be spending that cash to begin with. He's a saver. I _think_ that's what it's saying. But i'm not an economics major and have no background in this, and I know a lot here do, so wanted to get other's take on exactly what this article is saying and if my understanding of it is incorrect. There's a lot being said in this article that just goes right over my head. And there seems to be another definition of quantitative easing where new money supply is put into circulation via the Fed buying securities rather than the Fed printing money out of thin air.