The mainstream media pushes the QE causes price inflation mantra because that's all they understand. Central bankers believe QE creates inflation because that's all they understand (or accept). This is how QE was supposed to work: Treasury issues debt ----> banks and pension funds buy newly created debt from Treasury ----> central banks buy Treasury securities from banks and pension funds ----> banks create more deposits in the form of increased lending to businesses and consumers ----> economy booms! What actually happened: Treasury issues debt ----> banks and pension funds buy newly created debt from Treasury ----> central banks buy Treasury securities from banks and pension funds ----> ES reserves skyrocket/pension funds load up on stocks ----> banks fuel mortgage lending spree, share prices boom ----> asset price inflation, economy still fkd ----> QE abject failure Hence QE played very little part. It's a flawed Monetarist policy. Stimmies can be inflationary, especially in the face of supply shortages. The US government was more generous than ours, we basically just had a welfare scheme where temporary pensions were paid to those out of work including business owners, together with some generous policies around goods and services tax collected which was designed to encourage businesses to spend. Most of the welfare was spent on non-discretionary goods/services in the case of low-paid workers, in other words, what it would've been spent on anyway, or in the case of middle/higher income workers squirrelled away in savings accounts and not spent until recreational services re-opened "post-pandemic". Business investment by SMEs largely fell as it has been for over a decade.
Conflating QE with money printing is probably the main reason why the misconception between inflation and QE exists.
It didn't just go into assets, ES balances exploded. Now what can happen going forward is that pension funds are likely to trim their exposure to equities and instead buy bonds and the ES balances are probably going to stay high because CBs are paying banks to hold on to those reserves.
If it was about supply and demand Americans could shop for free haha. Oversupply is a growing problem here but the spending has slowed. Although i dont expect prices to drop because currency devaluation and overprinting dollars has already happened. Its too late now and more supply wont do anything at all. We are already in recession i think.
