First off, the amount of QE = $85B per month, or $1.02 trillion per year. $65B of it is buying mortgage bonds, which is driving out private investment and the free market in that area. The other $20B is buying up the Treasury supply, which also squeezes out private players and artificially suppresses the interest rate. As you know, in a debt based fiat currency world, the interest rate is the price of money. So you can keep play the game a long time by keeping the price of money high through QE.
Second, scarcity is one factor that determines the price of money, true. But it is not the only one. Printing money is actually an important function and part of a long term healthy economy is the ability of the government to print as much fiat as the economy needs to maintain it's growth in transaction volume without liquidity issues. THink of it like this. You have a small swimming pool. If 10 paying customers are in it, then you are fine, but much more, then the pool gets too crowded and you may lose customers. So your job is to increase the size of the pool steadily as your population of customers grows, so you can continue to invite all your customer to the pool and increase your profits.
So printing money in that context is ok, but it the money supply should not outpace the growth of the economy. If it does, then you are building up excess capacity in the economy and a bubble will form. This will eventually lead to inflation and a serious contraction. Already, signs of inflation are everywhere in our economy, on all the things that matter to the 99%. On top of that, we have bubbles in Treasuries, MBS, houses, the stock market, and many other places.
The Fed has already created multiple bubbles and it won't end well. Just as the Fed is saying right now that there is no bubble, when the bubble bursts and more pain comes, they'll say that no one could have seen in coming. |
