Quantitative Easing leads to higher inflation?

Tim Farrelly | farrelly's Investment Strategy | 07 July 2012


This one just won’t go away. The argument goes like this... Quantitative Easing (QE) involves a central bank creating money out of thin air to buy (generally) government bonds. This in turn dramatically increases money supply and leads to inflation down the track. The reason it hasn't created inflation to date is because velocity has collapsed as the banks won't lend out the money and instead, have just left it with the Fed. But when confidence returns,...

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