Federal Reserve launches QE1
On November 25, 2008, the Federal Reserve announced it would purchase up to $600 billion in mortgage-backed securities and agency debt. This was the first Quantitative Easing program. Within two years, the Fed had expanded its balance sheet from $900 billion (pre-crisis baseline) to over $2.3 trillion, and the QE framework was extended through QE2 (2010) and QE3 (2012). The mechanism — creating reserves with keystrokes to buy financial assets — was not technically new, but it had never been done at this scale outside of wartime. The U.S. monetary base roughly tripled between 2008 and 2014 without producing the consumer-price inflation that would have been predicted by pre-2008 monetary theory.
Where the newly-created money went is the central economic question of the era. It did not broadly circulate in the real economy — M2 velocity collapsed. It did flow into financial asset prices: from 2009 to 2021, U.S. stocks rose ~6x, U.S. bonds rose ~25 percent, housing rose ~100 percent. Consumer prices rose ~30 percent. The composition of that price response is still debated.
07 · Stealth Printing
In November 2008, the Federal Reserve launched Quantitative Easing — the purchase of long-dated Treasury and mortgage securities with newly-created reserves. It was, mechanically, money-printing. Politically, it was called 'unconventional monetary policy.' The innovation was not the printing; central banks had been doing that for three centuries. The innovation was that the printing became invisible to most people — the new money entered the financial system through bond purchases rather than fiscal deficits, and its effects showed up in asset prices rather than in consumer goods. Alongside QE, central banks have developed a toolkit of yield-curve control, reverse repo operations, currency swap lines, and measurement adjustments to the inflation indices themselves. The era's thesis: debasement still happens; it's just harder to see.
Read the full era →- Sep 21, 2011Operation Twist — maturity manipulation
- Apr 4, 2013Bank of Japan launches QQE
- Jan 29, 2016BOJ introduces Yield Curve Control
- Mar 23, 2020Fed announces 'unlimited' QE for COVID
- 1996 — 2023CPI hedonic adjustments and substitution
- 2018 — presentTurkish lira collapse — rate cuts into inflation
- Sep 23 — Oct 14, 2022UK gilt market crisis
- 2023 — 2025Central Bank Digital Currency pilots