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Economy

Money Creation in the Time of Quantitative Easing (Q.E.)

Money Creation In the Time of Quantitative Easing or Q.E.

In capitalism, the government’s role in creating new money is limited. It mostly moves around money that is already in the economy, funds itself by collecting taxes or selling government bonds, and then spends that money back into the economy. So most of the money the government touches is already in the economy.
 

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Are We in Another Financial Bubble?

Are We in Another Financial Bubble?

Starting in late 2008, with a touch of a keyboard, the Fed created trillions of dollars to buy bonds. The banks that sold the bonds ended up with reserves; reserves are used only among banks, however, so very little of that money made it into the economy. To push new money into the economy, the Fed also bought bonds from non-banks, such as pension plans and asset managers.

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