Common sense and history both suggest a pause in QE

QE means Quantitative Easing. It means Central Banks printing money. But their kind of money is Credit Money, i.e. somebody receives interest payments, and taxpayers pay via the Government’s share in the budget of “public debt interest payments”.

This letter in the FT prompted me to spell it out, once again:

When Governments print money, it’s “Cash Money” which is not only free of interest, but also gives them seigniorage as income.

However, creating money electronically out of thin air would not justify seignorage. But why do Governments hand their power of creating money over to their Central Banks?

Your guess about politicians and central bankers is as good as mine…

My response to Mr George Taferner is this:

Dear Mr Taferner

I read with great interest not only your letter in the FT, but also your document re Quantitative Easing.

As a mathematician and system analyst (formerly at CERN), I apply a somewhat ‘sharper logic’ when analysing Bank of England and other statistics.

For the big difference between Governments printing money and Central Banks printing money is… interest!

Governments do it interest-free and thus contribute to Cash or M0 in the money supply. Central banks do it at interest and thus contribute to M4. Meanwhile, NOBODY creates the interest necessary to pay for Credit. But Governments are used to extort interest payments from taxpayers.

Regarding “inflation”, I suggest you consider distinguishing between “monetary inflation”, i.e. the inflation of the money supply, and “price inflation” which is well known.

The tragedy is that the real process of money creation and the steady increase in history of Credit over Cash is hardly known, let alone observered and certainly not stopped or reversed.

I would be most glad to communicate with you about this.

Meanwhile, I put an article on my blog.


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