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| Are the obligations of QE included in published debt stats? in forum [Monetary]
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Mickanomics
Posts: 91
Incept: 2009-09-08
London
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Unless I'm very much mistaken, QE is not "money printing" at all. It is much more like other borrowing, i.e. brand new money is created at the outset, but there is a commitment to make the money disappear back out of existence when the loan is paid back. When a central bank creates fresh new money to buy back existing government bonds, the bonds are not just thrown in the bin, instead they are kept and honored, the central bank are still obliged to pay both the coupon and principal on those bonds... But the process of the central bank "paying" these debts amounts to making existing money disappear. This whole process is a measure to give confidence to future buyers of government debt. If the Chinese thought that the government were prone to creating new money with a printing press wherever they wanted, they would be much more nervous about buying our debt. What we're effectively doing with QE is saying to the Chinese "ok, we're creating some extra money right now, but we're committed to reducing the amount of money in the future."
Having said all that, my question now is: do the official debt statistics, and statistics quoted in the media take the debts created by QE into account? I am just suspicious that the compulsory unwinding of QE is being swept under the carpet.
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Mrbill
Posts: 7857
Incept: 2008-10-19
North Carolina
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Debt held by the public = US debt. The Fed owns some of that via QE, and that's reported on their balance sheet. The part the Fed owns is counted in the media-cited US debt numbers.
The Fed's liabilities are currency and their assets are those bonds and other bonds. Looking at the Fed's balance sheet, there's no unwinding happening yet, and to those of us on TF, it seems very unlikely it'll ever happen. But, they do promise that they will unwind, someday.
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