However, QE’s subsequent depiction as a form of “magic money tree” is misplaced. In my 1997 paper and subsequent book, I stressed the difference between freshly-created money when it is actually used for productive purposes – in other words, for business investment that creates new goods and services or increases productivity – and when it can be used for unproductive purposes for example financial asset and real estate transactions. These basically transfer ownership from just one party to another without adding on the nation’s income.

This meant that quietly, following this global financial catastrophe, the central banks were able to further more increase their powers again, during the name of greater scrutiny with the financial sector. The European Central Bank was particularly successful in increasing its powers over the following decade.

The core from the idea was increasing Japan’s total transactions in the economy by increasing the supply of money to the nation’s “real economy”.


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Some critics question the effectiveness of QE, especially with respect to stimulating the economy and its uneven impact for different people. Quantitative easing can result in the stock market to boom, and stock ownership is concentrated among Americans who're already well-off, crisis or not.

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When the fed funds rate was Reduce to zero during the Great Recession, it turned impossible to cut back rates even more to encourage lending. Instead, the Fed deployed QE and started purchasing mortgage-backed securities (MBS) and Treasuries to keep the economy from freezing up.

Similarly, if bank credit is created chiefly to support household consumption, this will inevitably lead to consumer price inflation.

I.e. I suggest the muted effect of QE has more to perform with the nature with the recipients of “QE cash”, than with everything to try and do with ordinary people.

Critics have argued that quantitative easing is effectively a form of money printing and point to examples in history where money printing has led to hyperinflation.



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Apparently agreeing with my critique that pure fiscal policy does not bring about economic growth unless it's backed by credit creation, Blackrock had argued at Jackson Hole that the “next downturn” would require central banks to create new money and find “methods to get central bank money directly from the hands of public and private sector spenders” – what they called “going direct”, bypassing the retail banks.



Even the Bank of Japan, having previously argued for 2 decades that it could not quite possibly purchase assets from any one other than banks, suddenly engaged in this abnormal operation at the exact same time as other central banks, and on a massive scale.

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