#82 QE and inflation. A popular debate with no real substance
QE and inflation is one of the most popular debates in macro—and one of the most misunderstood. In plain language, QE is the Fed buying bonds and paying with bank reserves: they hit “enter” and reserves show up on a bank’s account at the Fed. The real question isn’t whether that money “exists.” It’s what the second-round effects are—especially when QE ends up supporting the Treasury market that finances the fiscal deficit.