Quantitative Easing - unsheathing the magic of Inflation (the enemy of my enemy)

Dear Edward,

I'm really intrigued by the Bank of Canada's new monetary tool - known, in the best central circles, as Quantitative Easing (henceforth “QE”).

The sad aspect is no one is plainly explaining what that means ... i.e. control over the Quantity of What is being Eased? And what can be expected when that Easing takes effect?

Definition of QE - "printing money to buy bonds which frees up that money to do other things"

Aug 4/09

Flaherty may take steps to keep Loonie low

June 26 Bloomberg Video
Inflation may 'Crop Up' in Six Months

Why Carney's caution is warranted
Derek DeCloet
Globe and Mail Update, Saturday, Jun. 20, 2009 -from 3rd last paragraph
"A government can raises taxes or invent new ones (goods and services tax, anyone?) – or, as a last resort, let the printing press run harder and longer, and allow inflation to work its painful magic."


Real Yields at 5% Show Inflation Fears Overdone: Chart of Day
June18 - Bloomberg
3rd para "“It seems that while participants have the right idea about the long-term inflationary impact of current monetary policy they have their timing off by several quarters,”

Bloomberg June 15/2009
Carney may ...

The New Normal of Irresponsible Central Banking & Anti-Deflation Fighting
Bloomberg July 15/09

Inflation Will Accelerate Next Decade, Economists Say

Bloomberg Aug 31

"The Federal Reserve will be unable to prevent the trillions of dollars in government stimulus pumped into the U.S. economy from stoking inflation over the next decade, a survey of business economists showed. The price gauge tracked by the central bank will rise 3 percent a year on average from 2014 through 2018," snip

Oh, that's not surprising .... is it?

It seems at certain times within the economic cycle, "new money" can be created by the Central powers that is backed by 1) the Sovereign Assets of the Canadian Crown and 2) the CDN Crown's unlimited Authority to tax the Assets, Goods, Services, Wealth, Gains and Incomes of its Subject/Citizens, but ... this QE "money"(huge gobs of it) is un-encumbered by the annual interest costs associated with money created the old-fashioned "20th Century way" - by issuing interest-bearing bonds as "security/collateral".

The no-interest aspect of this new money-creation process is wonderful because of the huge gobs “quantity” being created. Oh yes, just imagine the extra tax burden that would have been imposed upon us Subject/Citizens if we'd have been obligated to pay interest (even at these low rates) on that amount of additional money “as debt”.

So this brings me to the intriguing part:

a) on the balance sheet of which government agency/ department/ crown corporation is the sum total of the "quantity of this easing" to be recorded, reported and accounted?

b) when the time comes to prudently remove some/all of the excess "quantity of money" from our monetary system and if these huge sums of QE "money" pay no interest (and earn no interest- we borrowed it from ourselves) ... will we pay off/retire/remove the QE "money" first ..... or shall we pay it off AFTER we retire some of the "20th Century money" that does bear interest?

c) if the Stewards of the Canadian Fisc were able to borrow-without-interest-from-ourselves just now, in the midst of a world-wide monetary and economic crisis - why didn't they do it before, when just Canada was experiencing fiscal/economic hardship?

d) if they had done so, would that not have saved Canadians the $20-40 Billion annual public debt service charges that have been ruining government budgets and driving up taxes over the last 30 years?


Ask around for me won't you? Perhaps that Dalton fellow or his Dwight hand man (ha, ha) – I daresay that Circus?Carnival (sp?) chap at the Bank of Canada and that short fellow from Whitby cannot be expected to provide a straight and/or simple answer.


Regards, your chum,

S(dot)