Talk:Quantitative easing/Archive 3

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Richard Werner, the creator of the english expression "Quantitative easing"

Why is it forbidden on Wiki to allow Professor Richard Werner to be properly credited with the creation of this name for this type of monetary policy?

Werner is an acknowledged expert on japanese inflation and a long term critic of the policy of the bank of Japan.

Lawrence K Hoo chose to delete this information with the abusive comment that Werner is a fringe character.

Time and time again, Wiki editors create torturous descriptions of simple financial processes that they either barely understand or they refuse to allow to be made clearer.

Experts on wiki are reduced to fools and idiots while academics with barely any experiences of real life have their opinions improperly elevated.

Werner lived in Japan, was an advisor to the bank of Japan, and published articles in important Japanese financial newspapers on the subject of Japanese deflation and he gets no mention at all on this page and has his reputation trashed by unacceptably abusive actions that conceal the truth. Andrewedwardjudd (talk) 07:25, 19 June 2011 (UTC)andrewedwardjudd

The sources do not support the Werner claim, and the amount of detail included is clearly overweight. It had been continually reinserted by a WP:SPA account with a clear conflict of interest that does little else except fluff up Werner's presence on Wikipedia.
Also, Andrew, you may wish to know that Wikipedia has a policy against wikihounding, that is tracking another user's edits in order to disagree with them. This is clear evidence of a battleground mentality and is unacceptable behavior. LK (talk) 06:16, 20 June 2011 (UTC)
Lawrence if i ever have clicked on your contributions link it is not to track you to disagree with you but to make sure you are not talking more nonesense and trashing other peoples reputations in your usual manner. My intention is only to create a decent enclyopedia, where central bank operational documents and well cited real life practices should be more important than the opinions of text book writers who seem to have considerable difficulty ensuring their details are correct, because like you they seem to be caught up in pet ideas of how things work. Andrewedwardjudd (talk) 11:45, 20 June 2011 (UTC)andrewedwardjudd

Recent revert

I reverted Andrewedwardjudd's most recent edit here because none of the changes is supported by the cited sources. Furthermore, I think one can see the changes in the "Printing money" section are misplaced if one looks carefully at the paragraph's context. The paragraph explains differences between true QE and debt monetization and suggests how one could tell the difference in practice; it's not about whether any current policy decisions amount to one or the other. That question is addressed (partially) in the next paragraph, which discusses a credible critic who accuses the Fed of monetizing debt. The article would benefit from some additional (properly sourced) discussion of that question. Lagrange613 (talk) 08:11, 19 June 2011 (UTC)

Total rubbish. Fisher, sorry correction, Bernanke a central banker and mcteer an economist are cited already in the article.
On of the citations mentions that Ben Bernanke said the government can always print money to prevent deflation and every person on the planet with knowledge of this subject knows that BB said he had access to a printing press and could drop money from helicopters if necessary.
You are simply making things up to support your agenda. Stop it! And enable editors to create a useful source of well cited information that is not forced to fit the contents of your mind. Andrewedwardjudd (talk) 10:56, 19 June 2011 (UTC)andrewedwardjudd
Your new edits have sources, which means they are in line with the only "agenda" I have, namely bringing this article into compliance with the core content policies and other guidelines. My one issue is with this edit, where the citations that follow the sentence support only the media using the "printing money" nickname. If economists and analysts also support it, please cite a source inline. Also, regarding your summary to that edit, reverting a change once and coming to the talk page to discuss is not edit warring; it's encouraged. Lagrange613 (talk) 16:44, 19 June 2011 (UTC)
read the existing citations. In any case edits are only required to be verifiable. If you do not realise that every man and his dog is aware of money printing then you should not be editing wiki finance. You have been edit warring money printing for days on end. Andrewedwardjudd (talk) 17:54, 19 June 2011 (UTC)andrewedwardjudd
Please indicate which of my edits constitute edit warring. Lagrange613 (talk) 18:47, 19 June 2011 (UTC)

You have been beating the hell out of vexorg over money printing for days on end. Meanwhile all of this time there was a reference at the bottom of the page by bernanke to using the printing press or its electronic equivalent, with specific mention of printing money to buy agency MBS. Then you delete my attempt to correct the false idea that money printing is a media nickname that is not used by many well known people. The fact you are now claiming innocence is just more warefare. Additionally you accused me of being politically motivated. Then you were strangely giving me a hard time over the 2005 BOE winter quarterly bulletin telling me there was no inline citation and putting needs citation tags on it. Andrewedwardjudd (talk) 19:43, 19 June 2011 (UTC)andrewedwardjudd

Your dislike of my edits is noted. Please indicate which of my edits constitute edit warring. Lagrange613 (talk) 19:45, 19 June 2011 (UTC)
Currently you are forcing the money printing section to say that QE is not money printing but is instead appropriate policy. I actually agree with the policy but others do not. Obviously they are "printing money" and if they did not our economies would have collapsed years ago. They might fully unwind these transactions and fully normalise the balance and there might be no permanent monetization. But we have no way of knowing that.
http://en.wikipedia.org/w/index.php?title=Quantitative_easing&diff=435057135&oldid=435057016
You deleted that citation where people are worried about QE.
Bernanke says it is the electronic equivalent of money printing.
Plenty of people are worried for reasonable reasons but you wont allow reality to be revealed on wiki. Instead you want to sanitize QE, as if people who are worried are too simple to understand and everything is under control. We cannot know that. We should not talk in the voice of the government as the voice of wiki.
http://en.wikipedia.org/w/index.php?title=Quantitative_easing&diff=435057016&oldid=434902109

You removed my comments saying none of my changes were supported by the citations. Bernanke gets a mention and is cited already for his entire money printing speach. Mctagg? the economist is mentioned. Obviously anybody who knows this subject knows that financial analysts and economists are talking about money printing. The feds are printing money for heavens sake. But you will not allow it to be shown on wiki. And you aren now denying your efforts to do this. [User:Andrewedwardjudd|Andrewedwardjudd]] (talk) 19:57, 19 June 2011 (UTC)andrewedwardjudd

I explained both edits at the top of this section and in their summaries. Your dislike of them does not change my stated reasons for making them, the legitimacy of those reasons, or whether they constitute edit warring. I said above that this article "would benefit from some additional (properly sourced) discussion" of issues surrounding QE and its critics. If you'd like to start working on that, and locating the content appropriately within the article, I would support it. Lagrange613 (talk) 21:05, 19 June 2011 (UTC)
Lagrange613 (talk) you do appear to have a personal agenda to prevent the fact that money is created 'out of nothing' from being on Wikipedia. Denying this agenda is pointless against an overwhelming evidence that is now beyond reasonable doubt. There is nothing wrong with creating money out nothing. There is now other way of doing it unless you use a physical commodity such as gold to tangibly back the money. Can you tell us Lagrange613 (talk why you don't want the fact money is created out of nothing included in Wikipedia? Vexorg (talk) 21:57, 19 June 2011 (UTC)
As I said before my issue is with including it absent an appropriate source in the lead of this article. The OMO article would be a better place for it if you can find sources that support the language. Lagrange613 (talk) 22:02, 19 June 2011 (UTC)

Hypocritical editing

Lagrange613 (talk) you said the following at the top of the previous section .... "I reverted Andrewedwardjudd's most recent edit here because none of the changes is supported by the cited sources."

Yet you were happy to see the removal of my additions to the article which were supported by several reliable sources/references. It is clear you are contributing to wikipedia with a bias which is devaluing this fine encycplodia Vexorg (talk) 21:49, 19 June 2011 (UTC)

Nope, in both cases the sources didn't support the language, as I explained above. Lagrange613 (talk) 21:56, 19 June 2011 (UTC)
Not good enough. I'm afraid more than one editor is seeing through your obvious agenda with this article. Please do NOT remove properly sourced/referenced information from Wikipedia. Vexorg (talk) 22:02, 19 June 2011 (UTC)
You are removing properly sourced information, which has nothing to do with those reasons. Vexorg (talk) 22:02, 19 June 2011 (UTC)
And it is for those same stated reasons I am reverting your most recent change now. Lagrange613 (talk) 22:00, 19 June 2011 (UTC)
No! - The source directly support the language used and is relible and verifiable. I have restored the information. PLEASE STOP EDIT WARRING Vexorg (talk) 22:08, 19 June 2011 (UTC)
Please indicate which of my edits constitute edit warring. Lagrange613 (talk) 00:26, 20 June 2011 (UTC)
define edit warring Vexorg (talk) 02:55, 20 June 2011 (UTC)
Since you ask, let me refer you to Tendentious Editing, where it states: "Tendentious editing is editing with a sustained bias, or with a clear viewpoint contrary to neutral point of view ... a pattern of edits displaying a bias"'. Continually reinserting wording that has been contested, and that is not found in any reliable sources, pretty much fits into that description. LK (talk) 05:51, 20 June 2011 (UTC)
Given you are removing material that is referenced by reliable sources, it is clear you are playing games. Frankly I am disgusted with your attitude to wkipedia LK (talk). I am compiling a dossier on your disingenuous editing agenda which proves you don't have the quality of Wiipedia at heart, and you will be sanctioned upon it before too long. Vexorg (talk) 06:35, 20 June 2011 (UTC)

Opening Paragraph

Currently the opening paragraph has the sentence "Quantitative easing shifts monetary policy instruments away from interest rates, towards targetting the quantity of money." not only is the spelling of targeting sub-optimal the wording is also bankers speak and will not be understood by a lot of readers. Instead it should should be worded something like "Quantitative easing increases the quantity of money whereas other policies target interest rates".--Caparn (talk) 22:13, 19 June 2011 (UTC)

"Monetary policy intruments" is just non-specific jargon in this case. And yes we should move away from Banker's speak. And as a change in interest rates is to adjust the quantity of money and stimulate spending then the 'phrase' "away from interest rates, towards targeting the quantity of money" is not optimal at all. Vexorg (talk) 22:19, 19 June 2011 (UTC)
Move away from central banker's words to what? Stuff made up by biased columnists, libertarian blog rants, or just your own OR? I suggest we stick with WP:POLICY and report what is said by reliable sources, foremost of which would be documents from academic research institutions, and the research staff of the central banks themselves. LK (talk) 05:33, 20 June 2011 (UTC)
No, no and no. My suggestion was aimed at making the opening paragraph understandable to the majority of reader that will access the page. I don't think the opening paragraph should be made understandable only to bankers and economics degrees, jargon like this, if it is to be included, should go further down the article.--Caparn (talk) 19:22, 20 June 2011 (UTC)
Oh really? So how about you change the out of date stuff about OMO as the only method of controlling market interest rates and you stop abusing editors and others that they are fringe when they correct report comments that can be attributed to central bankers on money printing?
When it suits you you force others to only cite text books. At other times central bankers have to be cited.
It is absurd the way you and others insist the central bankers are outside of the mainstream of economic thought and you slavishly rely on the opinions of text book writers who are so often wrong when you quote them, compared to modern central bank policy
You and others bent over backwards to prevent central bank citations being correctly described on the FRB page. Your opinion was all that mattered. You have no right to abuse others in the way you do where you claim you are an authority and others are nutters when the central bank citations are available to show you are often muddled and confused. Andrewedwardjudd (talk) 05:58, 20 June 2011 (UTC)andrewedwardjudd
This post cannot conceivably be motivated by a desire to improve this article. It is also a clear violation of WP:CIVIL. I suggest you remove it now. LK (talk) 06:00, 20 June 2011 (UTC)
You were abusive with vexorg over money printing and said it was a fringe belief. He asked you many times were the money came from. Once again you owe an editor an apology. Instead you abuse me. You have a blindness to your behaviour. Andrewedwardjudd (talk) 06:03, 20 June 2011 (UTC)andrewedwardjudd
On the contrary LK (talk) the post made by Andrewedwardjudd (talk) is actually civilised in that is is restrained considering your behaviour regarding this article. Andrewedwardjudd (talk) is telling the truth about your behaviour and if I were him I would look at your request for him to remove it with the utmost ridicule. For someone to call the creation of money a 'fringe belief' is t3eh sign of someone who hasn't a clue about the subject in hand. Frankly it's laughable. LK (talk) you have exposed yourself as having no credibility whatsoever to even participate in this discussion, never mind contributing to the article itself. I suggest you go and edit article you know at least a little about. The creation of money, whether that is QE, OMO, deposit multiplication through FRB is clearly a subject you know nothing about. I also suggest you remove the claim of having a degree in economics from your homepage. Vexorg (talk) 06:47, 20 June 2011 (UTC)

oposite of Quantitative easing?

what is opposite of Quantitative easing? Quantitative easing= printing(+) money, is there any remove/throw away(-) money? or decrease money flow in market? — Preceding unsigned comment added by Happytony80 (talk • contribs) 06:54, 22 June 2011 (UTC)

If for example the feds were to sell all of the currently held QE purchases and were to get all of their money back then that would be QE neutral. Ie as if QE never happened.
The opposite of USA QE would be if the feds began selling the 1 Trillion of assets they hold that back the banknotes on issue and burnt the banknotes so they vanished and went nowhere so that the number of banknotes in circulation was reduced.Andrewedwardjudd (talk) 09:37, 22 June 2011 (UTC)andrewedwardjudd

Different flavours of QE. Original research is creeping into the introduction of QE

A few editors here are interpreting QE has a method of increasing the likely hood of the banks lending reserves to the wider economy. Whereas it is normal policy of the central banks to supply the banking system with all the reserves the banking system wants at the published prices, and the banking system only uses the reserves as reserves rather than to loan money - the banks tend to lend obligations, unless they are actually lending cash banknotes.

So this interpretation that QE involves increasing the amount of money in the banks amounts to original research. The boe clearly say that private bank lending involves the bank writing a cheque against itself by 'creating money'. The boe clearly does not think the banks are lending their reserves, nor does it have any time for money multiplier theories about 'the bank lending channel'

1. The boe has emphasised their QE involves ensuring the wider economy has sufficient spending power to prevent inflation falling below the target so the objective of their QE is to inject new money into this wider non-bank economy so firms and householders still have sufficient money.

2. The feds have tended to emphasise a need to ensure wider market interest rates fall into line with the central banks policy of lower rates, where the quantity of money in the banks is not an issue because as per bernanke these reserves do not impact the wider economy since they only exist at the central bank. That is what he said anyway. If people want to present a case he is wrong then you will need citations that say he is wrong in the citations.

3. Bank of japan tended to emphasise quantity of money

4. Critics of QE have tended to emphasise quantity of money held by the banks.

5. In reality the banking systems of the UK and USA are totally stuffed full of reserves they have absolutely no use for whatsoever - they can already borrow reserves close to the central bank target and most already have a ridiculous amount of reserves they have no use for at all. The reason they are there is only because of the policies of the central banks wanting to support asset prices, maintain confidance and prevent surges in interest rates due to lack of interbank borrowing as confidance falls. You can argue otherwise but you would need to provide references, because the central banks already supplies all the reserves the banking system needs at near the target prices to ensure the banking system has no need to drive rates higher than the market rates. By the definition of convential monetary policy when the central bank has a zero interest rate target it is already supplying sufficient reserves and taking collateral accordingly so that the banks can borrow from the market at or near the target. What then is QE? It cannot be something that aims to increase the amount of excess reserves for the purpose of the banks having excess reserves because they currently have insufficient excess reserves.

6. Because the central banks control and operate the electronic payments there is absolutely zero risk that quantitative easing can result in a sudden surge of inflation or hyperinflation. That would only happen if the central banks felt unable to resist the urge to reduce inflation because unemployment was high during inflation and so forth. 7. As a generationalisation many editors here seem to think the central banks operate their target interest rate policy differently to the way it currently operates. Partly this is due to text books saying it works different i think. Several times i have attempted to focus on what seems to me to be a quite common error - and i have made no progress on this. But the same kind or errors are creeping into QE interpretations. 8. On wiki we are not permitted to make interpretation of anything. We can only say what somebody else has said where reliable sources have priority. There is a tendency here on wiki for people to agree with each other and require others agree with each other where reliable sources are not allowed to be presented if it contradicts the opinions of the consensus. Andrewedwardjudd (talk) 12:21, 22 June 2011 (UTC)andrewedwardjudd

The Bernanke quotation here states pretty clearly that bank reserves are the target of QE. Per (the first two sentences of) your #8, that's what we write. Lagrange613 (talk) 15:17, 22 June 2011 (UTC)
Bernanke is agreeing with me. He says Fed policy is not 'pure QE' where reserves are the target of that *other* policy that was followed by the bank of Japan.
The BOE policy is also not 'pure QE'
'Bernankes pure QE' is what the bank of japan did, where long time critics of the BOJ constantly said it would not work.
In fact before 'pure QE' people were already suggesting the 'real QE' which is more along the lines of what bernanke has done where more or less the kitchen sink has been thrown at the problem to prevent deflation.
Critics of Bernanke have however focused on the increase in reserves and accused Bernanke of not understanding the basics of the expansion of credit. Which appears to be total nonesense because bernanke is not focusing on increasing the reserves to enable an expansion of credit as the critics claim he is doing.
At the moment different flavours of QE are being blurred into a single interpretation of QE using citations from different central banks and the result is the QE page reflects too many opinions where we are all getting confused one way or another.

Andrewedwardjudd (talk) 16:51, 22 June 2011 (UTC)andrewedwardjudd

Certainly QE as theorized and as implemented is interested in more than just bank reserves, but the Fed emphasizes reserves quite a bit in the cited documents. The article reflects the content of the cited documents, so it's not OR. Lagrange613 (talk) 20:58, 22 June 2011 (UTC)
The edits are clearly original research that seek to emphasise the importance of additional reserves using links that say otherwise. LK made the comment the other day that QE is defined by the preannounced quantity of reserves, whereas the Fed clearly says it is defined by the support of credit easing at the buisiness and household level, where the rise in reserves is simply a by product. LK is thinking of the BOJ policy, which bernanke has specifically said is different to the feds policy of credit easing.
The BOJ policy has been seen largely as a policy failure because QE has to act outside the banks in the wider economy.Andrewedwardjudd (talk) 21:14, 22 June 2011 (UTC)andrewedwardjudd
It seems you're arguing from WP:UNDUE, not WP:OR. That's a fine argument to make, although I'm not persuaded yet. You've posted about this a few times here but haven't received any support that I can see, so an edit you make related to this concern is likely to be controversial. I would suggest that you seek consensus here before you make any such edit, given that you've been asked by an admin not to edit the article for the next month. It would go a long way toward repairing the tone around here. Lagrange613 (talk) 21:31, 22 June 2011 (UTC)
The tone around here will be better when editors make an effort to read the existing citations before they revert perfectly reasonable edits while commenting on edit wars, and other totally unnecessary personal comments against editors hoping to improve wiki.
At the moment this article is muddling different QE policies where the feds themselves have confused credit easing with so called pure QE where their QE description of the BOJ policy is in fact in error because BOJ never did follow a pure QE but instead attempted the same old tired reserve increase formula that critics of BOJ said would never workd to create credit easing in the wider economy. The result is the page is a jumble of conflicting ideas and theories and is almost impossible to read without a significant degree of brain damageAndrewedwardjudd (talk) 21:50, 22 June 2011 (UTC)andrewedwardjudd

confusion in wiki QE introduction

A few editors here are thinking that the focus of 'QE policy' by all of the central banks is on an increase in reserves amongst other things. The feds however are emphasing their policy is not actually QE at all but rather credit easing.

For example the text reads:

"Quantitative easing may then be used by the monetary authorities to further stimulate the economy, by expanding the excess reserves in the banking system and....."

And cites two fed references 14 and 15

  • 14 links to the federal reserve where a question is put "I noticed that banks have dramatically increased their excess reserve holdings. Is this buildup of reserves related to monetary policy?" 'Dr Econ' answers that the short answer is that the excess reserves are significant for monetary policy. But Dr Econ continues to elaborate and bring more complexity to the short answer.

"the Fed took extraordinary actions that caused its balance sheet to dramatically increase in size and that made major changes in the composition of the Fed’s assets........later dominated by the Fed purchases of mortgage backed securities (MBSs), agency related debt, and longer-term Treasury securities. This marked the shift of monetary policy into unchartered waters that many refer to as “quantitative easing.“3 Quantitative easing is commonly defined as the policy strategy of seeking to reduce long-term interest rates by buying large quantities of longer-term financial assets to stimulate the economy when the overnight rate has already been lowered to near zero (see Bullard 2010 ). "


And finally after these detailed explanations 'Dr Econ says,

" the increase in excess reserves should be seen as a by-product (rather than the focus) of the policy action."

  • 15 links to Ben Bernanke who says "although the Bank of Japan's policy approach during the QE period was quite multifaceted, the overall stance of its policy was gauged primarily in terms of its target for bank reserves. In contrast, the Federal Reserve's credit easing approach focuses on the mix of loans and securities that it holds and on how this composition of assets affects credit conditions for households and businesses. Andrewedwardjudd (talk) 18:09, 22 June 2011 (UTC)andrewedwardjudd

[An editor] tell us how money is created

Lawrencekhoo tell us how money is created in layman's terms and we will agree to insert it into the article. Over to you Lawrencekhoo. Vexorg (talk) 06:38, 20 June 2011 (UTC)

Including a user's name in a section heading is considered impolite. Please don't do it again. If you are interested in how money is created, I suggest you read the article on money creation, or check out a macroeconomics textbook from your local library. LK (talk) 06:50, 20 June 2011 (UTC)
I will include your username where I see fit. It's a mature request for you to provide information. You are welcome to decline of course
@Vexorg, You have been violating several WP policies, particularly civility and editor warring. You seem to have been blocked repeatedly for edit warring, I can see after a second at your talk page. Please relax and abide by WP policies.
I removed the rude use of an editor's name in the subsection heading.  Kiefer.Wolfowitz 21:18, 20 June 2011 (UTC)
So are you going to tell us how money is created Koo or are you going to continue to edit war and keep removing properly sourced information from this article? I suspect the latter. Vexorg (talk) 07:05, 20 June 2011 (UTC)
Lawrencekhoo when you take a break from learning about how money is created, I suggest you remove the WikiKnight link from your home page.
You claim to have sworn to .... http://en.wikipedia.org/wiki/Wikipedia:Five_pillars .... yet you have violated that pledge several times in this discussion re your editing behaviour in this article. I claim you are not fit to display such a pledge. Vexorg (talk) 07:23, 20 June 2011 (UTC)
Hoos dismissive suggestion you read more is typical of the way he abuses other editors, where he ensures wiki reflects his opinions. Even the BOE says a bank loan is simply created by crediting the loan account - subject to the bank having the ability to meet the obligations it creates for the bank. Modern money mechanics by the feds says the same thing. According to Hoo people who believe this are fringe and outside of the mainstream. It is just nuts. And worse the abuse others get brings wiki into disrepute. Obviously the feds are inventing money to prevent deflation and there is no reason on earth why editors here cannot say so. Hoo is out of control. Andrewedwardjudd (talk) 07:44, 20 June 2011 (UTC)andrewedwardjudd
Amazingly Hoo has filed a report of me edit warring here -- http://en.wikipedia.org/wiki/Wikipedia:AN/EW#User:Vexorg_reported_by_User:Lawrencekhoo_.28Result:_.29 - yet he is edit warring himself. unbelievable. And definitely out of control Vexorg (talk) 07:48, 20 June 2011 (UTC)
You all need to step back and assume best behavior while editing this article.
Some of you seem to be POV pushing with original research, at least when your tempers have flared, as they have now. Please only discuss ways to improve the article using the highest quality, most reliable references, and stop all personal attacks.  Kiefer.Wolfowitz 21:24, 20 June 2011 (UTC)
The facts are pretty simple. Ben bernanke said he had the modern equivalent of a printing press. Fellow FOMC member James Bullard said QE was 'money printing if you like'. Other Fed officials have talked about "money printing". Labeling money printing as fringe or suggesting it is original research is totally out of order. The only issue here is that in modern times **currently**, the 'money printing' is happening electronically. But there is no reason for QE to be confined to electronic 'money printing'. Subsequent QE phases could involve actually physical printing. Andrewedwardjudd (talk) 07:27, 21 June 2011 (UTC)andrewedwardjudd
Please read carefully. You have already been blocked twice. You have received multiple warnings, including by 2 administrators in recent days, that you need to practice good editing practices.
I don't want to read another word of OR from you, especially not here. This is not a place to discuss the topic of the article. This page should discuss only improving the article using reliable sources.
Please suggest changes based on the most reliable high quality sources and let others implement those changes. Your voluntary compliance with the administrator's request, like LK's agreement that he will comply, will make this article a more productive place for other editors.  Kiefer.Wolfowitz 11:26, 21 June 2011 (UTC)
I assume by OR you mean original research. The idea i am putting forwards original research by quoting Ben bernanke on the printing press or quoting James bullard on 'money printing if you like/want' is a bit peculiar if that is what you are doing? What do you mean exactly by OR in association with my good name? And why is it you are threatening me while celibrating LawrenceKhoo on his talk pages? LawrenceKhoo was clearly out of order to attack Vexorg in the way he did by saying money printing was fringe when **top fed officials** have used the words.
The issue should have been discussed here instead of editors using patronising revert comments or referring Vexorg to a text book to help him understand the subject.
For the record this is the place to talk about improving the article. If you want to say that editors are not using properly cited high quality sources then you need to be a bit more specific as to what it is you are objecting to or if necessary place special citation rules on this pages which prohibits for example quotes from the BBC, the financial times, the economist, ben bernanke, james bullard and so forth.
And i now note that lagrange, who said i was politically motivated and privately said i was hiding information, invited freeloader to the QE page. Neither of these editors were warned, and yet both have been involved in efforts to prevent reliable information from appearing on the page. Freeloader peculiarly said on a revert "I don't find language like that anywhere in the BoE pamphlet. This isn't the youtube bears explaining QE ". And yet it is common knowledge that the BOE has talked about qe being simply creating money electronically (rather than printing banknotes). I had already quoted the BOe in the talk pages and this text had already once been present on the main article and it was already cited by another citation on the page. Lagrange also peculiarly said that 'None of these changes is supported by the cited sources', when i attempted to provide balance to the article by pointing out it was not only the media talking about money printing. Bizarrly, Bernankes 'helicopter money' printing press, money printing speech was already cited on the page, as was an economist.
Andrewedwardjudd (talk) 11:55, 21 June 2011 (UTC)Andrewedwardjudd
Responded to the "hiding information" accusation on AEJ's talk page. Lagrange613 (talk) 19:43, 21 June 2011 (UTC)
I consider my talk page to be a private place which i can arrange as i want. I dont consider it to be a public place. You made the following comments on your talk page, You did not contact me by phone or email and i did not want to suggest such a thing so i am sorry if you thought i was.
"Deleting entire paragraphs' worth of comments to pretend they never happened is the wrong approach here. If you'd like to indicate that a previous comment you've made isn't something you stand by, WP:REDACT mentions a few options, including striking out and substituting a placeholder. There's also Template:Nono. Any of these would be acceptable here. I'll give you some time to decide what you'd like to do, but if you do nothing, as I said, I'll be reposting your entire previous comment and indicating that (1) it's your work and (2) you deleted it. Lagrange613 (talk) 06:34, 17 June 2011 (UTC)"
Suggesting to me that i am pretending something did not happen and do not want to stand by it is the same thing as 'hiding something'. I was not hiding anything. I just thought my text was unclear, and unhelpful.Andrewedwardjudd (talk) 03:23, 22 June 2011 (UTC)andrewedwardjudd.

Well I see Mr Hoo, or is it Koo, still hasn't explained to us how money is not created out of thin air. Maybe it's not 'thin air' after all but created out of nothing, likethe universe was during the 'Big Bang' - Oh wait he edit warred that out of the article as well. My personal opinion is that Wikipedia has been severely devalued by editors that refuse to include properly sourced and reliable information. My weeks block was well worth the price to pay for at least trying to improve this encyclopedia. Andrew Edward Judd I commend you're tenacity!!! Vexorg (talk) 21:55, 29 June 2011 (UTC)

The Greek Tragedy

What if Congress fails to rein in its deficit spending and we get into a situation like Greece? Would not FOMC feel compelled to buy enough Treasury securities to prevent a catastrophic increase in interest rates? And would that not lead to excessive inflation? JRSpriggs (talk) 06:04, 28 June 2011 (UTC)
How could the US be in a situation like Greece when the Fed can print money? Greece cannot create money from nothing as they have to rely on the Euro from the Central European bank. If you are talking about debt though, how different is the US in terms of debt than Greece? The US has about 300 million people and $14 trillion debt or nearly $50,000 per head and Greece has a population of about 11 million and a debt of about $500 billion or a debt of about $45,000 per head. Additionally the USA GDP per capita is about $46,000 and Greek GDP per capita is about £30,000, so USA debt represents 1.1 years GDP per capita and Greek debt represents about 1.5 years GDP per capita --Caparn (talk) 11:32, 28 June 2011 (UTC)
I hope the U.S. tradition of central bank independence is strong enough that the Fed never feels "compelled" to craft monetary policy toward anything other than its mandate. I could say more on the issue, but, as Bart Simpson once put it, "This is neither the time nor the place." Lagrange613 (talk) 06:48, 28 June 2011 (UTC)
The fed has a duel mandate and this makes the future very uncertain. The feds actions to reduce short term interest rates can only be successful to reduce longer term rates if the policy on inflation remains credible. The situation therefore will be resolved by politics rather than monetary technocratsAndrewedwardjudd (talk) 07:52, 28 June 2011 (UTC)andrewedwardjudd
To Lagrange613: As Andrewedwardjudd said, the Fed has a dual mandate: (1) stable prices, and (2) low unemployment. These can come into conflict. If Congress continues to spend wildly and the FOMC takes a hard line against causing inflation, then we may reach a point where the U.S. Treasury cannot borrow enough money to service its existing debt. The resulting default would cause a financial crisis in the United States which might lead to high unemployment in violation of FOMC's mandate.
To Caparn: Greece cannot unilaterally create Drachma in an uncontrolled way without breaking the Drachma-Euro link. However, the threat to the European banking system posed by the impending Greek default puts pressure on the ECB to create more euros and bail Greece out. Thus they are exposed to the same kind of risk from which we suffer. JRSpriggs (talk) 21:29, 28 June 2011 (UTC)
There is no Drachma-Euro link, the Drachma doesn't exist, the Euro is in use in Greece. However, they could default on their debt and recreate the drachma and use it like they used to with massive inflation. The Greeks are generally corrupt tax dodgers. You only have to look at the news articles about there being only 324 people in the Athens suburbs who pay tax for owning a swimming pool, but when someone did an investigation using google earth they found there were really 16,974. In one month they discovered 4,357 doctors were dodging tax. And Europe wants to bail them out. One has to ask why?. Could it be that the bailout by the European bank will go straight out of the Greece to pay off the other banks that have lent them the money they can't pay back? This money that governments are lending Greece is going straight into the private banks pockets. They should be just left to default on their debt and go back to the ever decreasing Drachma.--Caparn (talk) 06:02, 29 June 2011 (UTC)
Debts created before the Euro must still be payable in Drachma converted at the official exchange rate when the Euro was introduced, so anybody with Drachma could pay and honour that debt, or not pay and be in default unless an acceptable alternative was offered which would have been placed into law when the euro was introduced - it must work that way. Interestingly in the case of Ireland the central bank of Ireland was able to 'print up' 51billion euros and lend those to the Irish banks with only prior approval of the ECB being required, with the ECB saying it was sufficiently small they were not concerned. No doubt the greek central bank has also printed up some euros. The ECB is owned by the member country central banks and each would want this ability, where obviously the biggest shareholders have more ability to 'print' if necessary.
In the case of the USA the fed would have no legal powers to prevent congress requiring them to produce money as required. The fed operates under authority of congress even if the fed is largely a private organisation owned by the various shareholder banks, probably however if the private banks interests were threatened interest rates would rise anyway and congress would be limited in what it could do that would make any financial sense for the government. Andrewedwardjudd (talk) 06:23, 29 June 2011 (UTC)andrewedwardjudd
re:"Debts created before the Euro must still be payable in Drachma converted at the official exchange rate when the Euro was introduced" Don't you mean that "Debts created before the Euro are payable in Euro calculated by the official exchange rate when the Euro was introduced"? If someone gave me some Drachma I wouldn't know what to do with it.--Caparn (talk) 10:48, 29 June 2011 (UTC)

I was using (new) "Drachma" to refer to euros issued by Greek banks. This notion that all euros are the same is just a pretense. As long as Greece remains an independent sovereign nation, it can choose to ignore the rules of the European union and issue more Drachma than ECB gave permission to issue. JRSpriggs (talk) 06:53, 29 June 2011 (UTC)

To the consumer all euro are the same, you can take a "greek" euro and spend it anywhere in Europe that accepts euro.--Caparn (talk) 10:51, 29 June 2011 (UTC)
http://www.telegraph.co.uk/finance/economics/2791587/Support-for-euro-in-doubt-as-Germans-reject-Latin-bloc-notes.html. Andrewedwardjudd (talk) 15:22, 29 June 2011 (UTC)andrewedwardjudd
That article is more about individuals actions while they worry about the break up of the euro. You can still take euro notes into any european bank and they change it for other euro notes.--Caparn (talk) 20:23, 29 June 2011 (UTC)

"global instability and trade wars"

I have reverted this edit for several reasons.

  1. Per WP:MOSINTRO the lead is supposed to summarize the rest of the article, which contains no reference to global instability or trade wars. Summarizing the risks of being too effective or not effective enough better represents the article.
  2. This isn't a great summary of what Stiglitz and Berner say. Their conversation about this starts at about 15:30 in this video. The closest they get to this is when Berner warns of the possibility of "currency wars and protectionism" as a result of QE by the U.S. The only mention of "trade wars" comes when Berner notes they're more likely during a recession. Protectionism can lead to trade wars, and the whole package can lead to global instability, but skipping straight to that within the article is synthesis.
  3. The BBC citation that ends the sentence doesn't support it. In fact, it doesn't support the old language discussing risks, either, so I've replaced it with a citation needed tag. I'm looking for an appropriate source now.

I would support a discussion in the article of the dangers of competitive devaluation and the role QE in the U.S. could play in increasing them; the "Risks" section seems a good place for it. Such a discussion would benefit from additional sourcing beyond this one TV interview. Lagrange613 (talk) 22:21, 25 June 2011 (UTC)

I found a couple media sources for each of the cited risks. I'd prefer an academic or bank source if anyone knows of one. Lagrange613 (talk) 22:34, 25 June 2011 (UTC)

Editors do not have to satisfy you in the way you are attempting to do where you make it impossibly difficult for people to enjoyable make changes unless they get your approval and the approval of the group of people who can be relied upon to ensure anything 'dangerous' gets removed from the pages.
Wiki is supposed to be readable by a child but it is not supposed to be a childs bed time story full of fantasies and fairy tailsAndrewedwardjudd (talk) 05:27, 26 June 2011 (UTC)andrewedwardjudd
Editors don't need to "satisfy" me, but they do need to comply with policies like WP:OR and follow guidelines like WP:INCITE and WP:MOSINTRO. You placed "dangerous" in quotation marks, so please indicate whom you are quoting. Lagrange613 (talk) 18:12, 26 June 2011 (UTC)

Out of nothing discussion

There seems to be a lot of objection to some editors putting that money is created by the central bank "out of nothing". I see nothing wrong with putting this "out of nothing" somewhere in the document and after reading through the discussions above I cannot see/understand what anyone's objection are to this. If possible can people put their point of view why it should or shouldn't be included in the article here. It is an indisputable fact that the the money used to buy government debt is created by the central bank and using the words "out of nothing" makes that a lot clearer, surely this is something and encyclopedia is supposed to do? The last paragraph in the "Process" sub-heading already that describes how only a central bank can "unilaterally expand the money supply" but this is not language that every reader will understand. They will have to know that "unilaterally expand" "create" and "money supply" means amount of money in circulation, i.e. create money out of nothing. Does anyone have any objections to a sentence being added after this to say that it is creating money out of nothing? The editors should be able to find some common ground on this point.--Caparn (talk) 21:42, 23 June 2011 (UTC)

Objections have been advanced recently by Lawrencekhoo (here), TheFreeloader (here), and bobrayner (here). Kiefer.Wolfowitz wrote about "POV pushing with original research", which I interpreted as an objection, though KW should correct me if I'm mistaken. Darx9url has reverted the language but not participated on the talk page. There are also some discussions in the archive, but you're already familiar with those. (You were part of those discussions, arguing the other side.)
As I've written a few times previously, it seems to me that this characterization is controversial at best, and an appropriate explanation of the use of the phrase doesn't belong in this article, much less the lead. It's a statement about how money creation happens through open market operations, so at best it might fit into one of those articles. Lagrange613 (talk) 22:24, 23 June 2011 (UTC)
Open market operations are generally speaking net neutral for the creation of money.
There is nothing controversial at all about emphasising money creation from nothing during QE.
The following kind of comments are totally unreasonable
"'Ex-Nihilo' is obviously a fringe libertarian POV that's being pushed." LK
"This btw happens all the time in modern monetary systems" Freeloader
"This isn't the youtube bears explaining QE" Freeloader (on a revert of the boe wording on electronic money creation)
"the bizarre fascination in money creation, and related subjects, that seems to be held by certain fringe groups" Bobraynor
'well,duh' darx9url (on a revert of the BOE wording of electronic money creation)
"POV pushing with original research" Keiferwolfowitz
Why are editors here being so hostile to editors who are simply describing QE correctly?
Here is James Bullard who at the time was on the FOMC and has done a great deal to communicate fed policy on QE
http://www.stlouisfed.org/media/video/transcripts/20090630-exit-strategies.pdf
"to purchase all of the assets is we’re creating reserves; so, that’s sort of printing money in a way, and that’s what’s leading to the big increase in the monetary base."
We can of course disagree on the use of money printing but why do editors have to make out people are finge for saying the money comes from nothing??? It comes from nothing and it is an unusual policy for an extremely deflationary environment where even zero interest rates fail to increase activity in the economy.
Andrewedwardjudd (talk) 06:26, 24 June 2011 (UTC)andrewedwardjudd
Saying that open market operations which create money create it "out of nothing" is intentionally misleading. The new money represents the assets which were purchased with that money. So actually, the new money is created out of the new reserve assets which are not "nothing".
On the other hand, it is true that money creation can be inflationary in some cases. This is especially true when the new reserve asset is a Treasury security backed only by the implicit (but probably politically unrealistic) promise to tax people to get the money to redeem it. It can also be inflationary when the resale value of the new reserve asset is less than its purchase price times the ratio of all the reserve assets divided by the monetary base, so that the average backing for a unit of currency is reduced. Of course, there are also other policies which can create inflation. JRSpriggs (talk) 06:58, 24 June 2011 (UTC)
it is true that money creation can be inflationary in some cases Where does the "can be" and "some cases" come from? That is probably one of the most trying not to admit the key point of QE that I have seen. Money creation is inflationary and it is also true to say that the only long term cause of inflation is creation of money by central banks. It is also true that quantitative easing is deliberately used to increase inflation.--Caparn (talk) 00:29, 25 June 2011 (UTC)
Reserves are liabilities of the central bank. The assets of the central bank are what are purchased with the created from nothing reserve liabilities.Andrewedwardjudd (talk) 07:34, 24 June 2011 (UTC)andrewedwardjudd
I was not talking about the "required reserves" and "excess reserves" of member banks. As we know, those are among the assets of the member banks and are liabilities of FRS. I was talking about the assets of the Federal Reserve System itself (see Fed Financial Statement) to the extent that they are available to be sold to redeem the monetary base (the dollar-denominated liabilities of the FRS). Thus they form the reserve assets of the FRS itself (not of its member banks). These reserve assets include: gold certificates (representing gold held by the U.S. Treasury); special drawing rights (liabilities of the International Monetary Fund); U.S. Treasury securities; notes of member banks backed by loans they have made to businesses (the discount window); coins of the U.S.; mortgage backed securities acquired during the recent financial crisis; etc.. See Factors affecting reserve balances for more details. JRSpriggs (talk) 09:36, 24 June 2011 (UTC)
I was focusing on this ":::Saying that open market operations which create money create it "out of nothing" is intentionally misleading. The new money represents the assets which were purchased with that money."
I don't see how this possibly counld be seen as intentionally misleading to say that money is created from nothing and is it then used to purchase assets. It is still creating money out of nothing and then using it to buy something.--157.203.42.50 (talk) 13:46, 24 June 2011 (UTC)
You need to explain to us how it is intentially misleading to say that newly issued government debt bought and progressively accumulated by the central bank, enables government spending to be possible, with electronic money created from nothing, whereas normally, other things being equal, government spending comes from existing money already present in the economy.
What part of that statement typed by me is intentially misleading?
To help you see your confusion you need to alter what you said earlier as follows "The new money represents balances the assets which were purchased with that created money." Andrewedwardjudd (talk) 10:12, 24 June 2011 (UTC)andrewedwardjudd
I think we are at a point where JRSpriggs(talk) needs to explain exactly how this is misleading. It seems to be a common way of getting out of explanations just by saying the most hypocritical things you could think of like "it's misleading" when it is in fact the clearest definition or putting official looking WP:xxxxx references which most of the time are incorrectly used.--Caparn (talk) 18:42, 24 June 2011 (UTC)

First, my irritation is primarily directed at Vexorg, not you-all.

Saying "created out of nothing" rather than just "created" is misleading because it suggests that there is something improper about creating money or that the money is not backed by anything, both of which are false. Creating money is a normal process engaged in by almost every adult in the western world. Whenever you write a check or use a credit card, you are creating money. And as I said above, the new money created by the FRS is backed by new reserve assets. Indeed, they are forbidden by law from creating money without it being backed by something.
I said it was intentional because Vexorg already knows the things I said above. He just chooses to ignore it in his eagerness to push a POV on the readers. JRSpriggs (talk) 00:29, 25 June 2011 (UTC)

Your first sentence above Spriggs is absolutely ridiculous. You are using original research to make such absurd claims that stating the facts about money creation suggest it's improper.
Also you calim I wish to push POV on the readers is disingenuous at best. Wishing to insert factual information is not pushing POV. This is alos information that is backed by verifyable sources and thus meets wikipedia standards. You're arguments about writing checks or using credit cards are irrelevant substanceless padding. So what if money is created by other means? It's created by Deposit multiplication thrugh FRB too. But it's still created out of nothing. Vexorg (talk) 22:08, 29 June 2011 (UTC)


There is nothing in the term "it is created out of nothing" that suggests there is anything improper about it, it is just a statement of fact. I think you are reading things that are not there. Exactly how does "created out of nothing" suggest there is something improper? In my opinion the only thing that the words "created out of nothing" do is make it clear and concise, something I believe an encyclopedia should do. To argue that because something is bought with it means it is not created out of nothing also has no coherent logic to it and is almost bizarre. Where is the logic/correctness in your statement about something being bought with it mean it cannot be created out of nothing? --Caparn (talk) 00:35, 25 June 2011 (UTC)
Caparn:
If you look above you will find that plenty there are plenty of reliable sources that are allowed be referenced in wikipeda that have been found by other editors. --Caparn (talk) 10:44, 25 June 2011 (UTC)
And if you look above you'll find those sources have not been accepted as reliable by the community for describing scientific consensus. Thus they're out. Lagrange613 (talk) 16:29, 25 June 2011 (UTC)
You have also misconstrued my sentence and taken it out of contexts. The statement was not about it being a statement of fact but that there is nothing in the statement that suggest "improper", something you still haven't replied to. --Caparn (talk) 12:58, 26 June 2011 (UTC)
How? Bland meaningless comments like this with explanation are useless. Goods now are ten times the cost in money they were in 1973. How could things have increased by a factor of 10 if it were not for the central banks creating money? If you think long term inflation is caused by anything else you must be kidding yourself. --Caparn (talk) 10:44, 25 June 2011 (UTC)
If you're unfamiliar with the ways inflation can happen independent of the central bank's actions then I suggest you pick up an intro macro textbook. Lagrange613 (talk) 16:29, 25 June 2011 (UTC)
A am familiar with other ways inflation can happen but not by a factor of 10 without the creation of money, there just isn't enough money in existence to have that sort of inflation without creation of money. You clearly can't find an answer to that question. --Caparn (talk) 18:15, 25 June 2011 (UTC)
I certainly do expect editors to use WT:xxxx pointers when the statement they are are referencing is breaking that rule. But in particular, user Lawrence Khoo (talk) uses these official WP: links incorrectly more often than correctly. You can look through the archive here or the complaints from other users on his talk page about the same practice (unless he has edited them out by now).--Caparn (talk) 13:13, 25 June 2011 (UTC)
To Caparn: What does "created out of nothing" tell a reader that "created" does not? Actually, only God can create something from nothing, so this is definitely an attack on the concept of creating money. JRSpriggs (talk) 01:57, 25 June 2011 (UTC)
Created out of nothing tells us that the money isn't just reprinted money that is already in circulation, it just makes it clear. I think if you start mentioning God in this argument it is a sign that you are losing, some people would quite reasonably argued that man created God and not the other way round, if you look at the definition for God in wikipedia you will see that God is described as a conception by man. If money can't be created out of nothing, then what exactly does the central bank create it with? --Caparn (talk) 10:37, 25 June 2011 (UTC)
I agree that the purpose Congress had in creating FRS was to encourage inflation by allowing money to be created by a method which, they mistakenly thought, would have no adverse side effects (recessions). And historically, FRS has caused inflation and recessions. However, I qualified my earlier statement with "can be" and "some cases" because it is, in fact, not always inflationary to create money. If you use credit to make a clever purchase, say buy a previously unrecognized valuable antique at a flea market, so that your net worth increases, then this use of credit should not diminish your credit-worthiness. Similarly, if FRS were very careful about the circumstances under which it created money, the value of the money would not decrease because people would know that its backing had grown stronger. Later, FRS would be in a better position to redeem currency by selling its reserve assets when necessary to maintain the strength of the dollar. This is not how it usually operates, but it could and should operate this way.
None of this is specific to QE, it applies to open market operations in general. JRSpriggs (talk) 01:57, 25 June 2011 (UTC)
You still need to deal with why you are telling me i am being intentionally misleading by saying the federal reserve is enabling spending by the US government using money created from thin air, whereas normally the US government spends money already existing in the economy.
It has nothing to do with Vexorg who is simply reporting reliable sources. Vexorg and others here got (Personal attack removed) for saying things no different to what the BBC and others have said.
Fomc Member Bullard specifically said the QE money would be inflationary over the longer term if not withdrawn. He specifically said it was like printing money. There is no reason why his money printing text could not be included in the lead, along with Bernanke money printing and electronic equivalent of the printing press.Andrewedwardjudd (talk) 07:16, 25 June 2011 (UTC)andrewedwardjudd
I have redacted AEJ's latest personal attack. Please stop that. Lagrange613 (talk) 07:40, 25 June 2011 (UTC)
If you could redact your attack upon me that i am politically motivated it would go some way towards easing the tone here, where a number of editors have been attacking me and other editors and you have made no comments about that? Andrewedwardjudd (talk) 08:12, 25 June 2011 (UTC)andrewedwardjudd
Done. Lagrange613 (talk) 08:21, 25 June 2011 (UTC)
Thanks. It would also help clear the air here if you could explain to me
  • why you are insisting the BBC is not a reliable source for 'creating money out of nothing'
  • Why you made so many two reverts to imply only the media was talking about money printing, when even bernanke was cited and a named economist mentioned it already on the page. If you can tell me you were unaware of the BB printing press speach that would give you a bit of credibility in my eyes. Either you lack awareness or something else is going on here. Perhaps you can clarify what is going on here please? Andrewedwardjudd (talk) 08:40, 25 June 2011 (UTC)andrewedwardjudd
Sources aren't created equal. Folksy media accounts are not substitutes for peer-reviewed academic works and expert publications when describing scientific consensus. As I explained at the time, my reverts were based on the fact that the sources cited inline didn't support the statements preceding them. Again, it's about verifiability, not truth. Lagrange613 (talk) 16:29, 25 June 2011 (UTC)
Please stop lecturing me on sources. All that is required is verifiability. The page already had citations to prove it was not just the media giving folksy accounts. There is no requirement to spoon feed editors with citations that are right next to what is said. If editors do not know the subject they should stick to some subject they know something about. Andrewedwardjudd (talk) 20:05, 25 June 2011 (UTC)andrewedwardjudd

To Caparn: If you merely wanted to be clear that the money created was not simply replacing old dollars being taken out of circulation, then "newly created" or "created (not as a replacement)" would be clearer. It should be apparent to you from this talk page that "out of nothing" does not make things clear, but rather obfuscates them. I do not believe in God. Saying "only God can do such-and-such" is just another way of saying that such-and-such is impossible. Nothing can be created from nothing, that is, creation from nothing is impossible. So what are you really saying when you say "money created from nothing"? Your statement is an absurdity. That is why I feel that you must have a hidden agenda in saying it. As for your question "what exactly does the central bank create it with?", I could say: it has the bureau of the mint print it on paper; or it puts numbers on its account books; or accepts that it is indebted to the recipient of the money; or some other details of the process. But I do not think that those details are particularly important to our discussion. JRSpriggs (talk) 17:42, 26 June 2011 (UTC)

So you are now arguing that it's the paper that the money could theoretically be printed on, or the magnetic flux patterns on a computer's disk, or the ink on the central bank's ledger that means it's not created out of nothing? I suggest if you want to see the sort of confusion people are having you look in Archive 1 at Pavelmalik's (talk) comments, in fact I'm going to put the comment here. This is from someone who is an editor of the QE page and declares they have a BS Economics 2006, MA Applied Economics 2008 and work as Investment Analyst at 60B institutional fund" : "Banks started to hold excess reserves after Lehman collapse, essentially as a response to the central bank liquidity measures at the time. That is where the money (600B+) came from, primary dealers gave it to the central bank/fed. Myself and other people have posted several authoritative references to the actual mechanics of QE, yet you still insist that you're correct because you read it in a BBC news article. Again, there is no money created out of thin air to fund the fed purchases. It's been proved over and over."
Flux patterns on computer disk are in no way tangible assets that can be constituted as not nothing in this context.--Caparn (talk) 19:51, 26 June 2011 (UTC)
If physical assets are what you are concerned about, then just say so! Why do you not say something like "The newly created money is, in most cases, not backed by physical assets such as gold or silver coins, but rather by financial assets whose value could melt away in a crisis."? Would that not be clearer and more correct than "out of nothing"? JRSpriggs (talk) 20:30, 26 June 2011 (UTC)
Physical assets are not my concern. For example, the central bank could perform something very similar to quantitative easing by just buying lots of gold from the bullion market. This would have a similar effect to quantitative easing, the price of gold would go up excessively (as the yield of bonds goes down with real QE) and also the additional newly created money, now in circulation, would cause general inflation of other goods. The money would still have been created from nothing and then used to buy gold. The point is that after the purchasing of the assets there is money that has been created from nothing causing inflation. The assets they buy are another separate issue --Caparn (talk) 22:15, 26 June 2011 (UTC)
Well, if you are against all creation of new money, then you would have to outlaw not only the FRS, but also: fractional reserve banking, checking accounts, credit cards, debit cards, money market accounts, bearer bonds, sales of stocks or bonds (other than buy-backs by the issuing corporation), discount coupons, vouchers, barter, etc.. Essentially, anything (other than previously existing money) which could be traded against other things of value would be prohibited. Is that what you want? JRSpriggs (talk) 00:10, 27 June 2011 (UTC)
Firstly, I am not against creation of new money. Describing a process and its effects does not mean someone is either for or against what they are describing. This is an encyclopedia, it is used to explain things not make them unclear. --Caparn (talk) 07:08, 27 June 2011 (UTC)
OK, then how about this "There is no law or regulation which limits the amount of new money which the central bank can create. Thus the money supply is potentially infinite."? JRSpriggs (talk) 09:01, 27 June 2011 (UTC)
Or why not say that the money is created from nothing? - Just to make it simple and understandable. I'm not sure you could create an infinite amount of money. Infinity would really produce some conceptual problems for readers (you're a mathematician you should know about that), for example how would you store it on a computer or how would you add 1 to infinity?; whereas nothing is very easy to imagine. Maybe the addition of related policies like the hyper-inflation in Zimbabwe should also be mentioned?--Caparn (talk) 12:23, 27 June 2011 (UTC)

So are you saying that I have finally hit on what you were trying to say? "Just to make it simple and understandable" must be a joke because "out of nothing" is the very opposite of that. "Potential infinite" does not refer to something which is a completed infinite; rather it is a finite thing which can be increased without any limit. (OK, we would run into computational limitations before the money supply reached a googolplex dollars, but that is what I would call "practically infinite".) If this terminology is confusing, then you can modify it (just do not go back to "out of nothing"). So let me take another stab at it — "There is no law or regulation which limits the amount of new money which the central bank can create. So the central bank could choose to increase the money supply until it causes hyperinflation and the currency becomes worthless as happened in Zimbabwe.". But just because they can do that does not mean that they will do that. Just because someone could jump off a cliff does not mean that he will jump off the cliff. JRSpriggs (talk) 01:20, 28 June 2011 (UTC)

JRSpriggs, I've reverted your edit for a few reasons. First, you seem to be considering only the U.S. Federal Reserve. Second, the first two sentences are arguably untrue. I'm not a lawyer, but the Fed's statutory mandate of promoting stable prices would seem to restrict them from pulling a Zimbabwe. Third, the last sentence is NPOV; while nobody is likely to disagree that hyperinflationary policies would be irresponsible, the writing is unencyclopedic. It would have been nice to have seen some sources cited; as written it reads like OR. Lagrange613 (talk) 03:58, 28 June 2011 (UTC)
To Lagrange613: Thank you for your explanation. I let myself be carried away trying to satisfy Caparn and the others. I hope they also appreciate your argument.JRSpriggs (talk) 06:04, 28 June 2011 (UTC)


I've never seen someone so obsessed about avoiding mentioning the fact that money is created out of nothing to the point where they have to put forward the most absurd excuses you can imagine. Anyone with even a modicum of knowledge on monetary practises know that money is created from nothing so why the ridiculous obsession with avoiding saying it? An obsession that is even flying in the face of accepted wikipedia inclusion criteria.... i.e reliable and verifiable sources. Just 'what' is the problem? Vexorg (talk) 03:25, 1 July 2011 (UTC)

Out of nothing discussion /continued...

The following was written on my talk page by Andrewedwardjudd:

if gold is money or can be used as money, ie if you have gold you can effectively spend it, then the same is true of a government bond. So if wealth in the economy is removed from the economy and stored and replaced with money then that is a liquidity and interest changing method. However this argument does not apply to monetizing the debt created by new spending. New spending is simply out of thin air. Similarly a helicopter drop of money would be out of thin air. QE of existing assets is not out of thin air. However for example when the feds began purchasing the agency mortgages new mortgages were also being created, so the wealth did not already exist for all the mortgages purchased in that program. QE is therefore partly out of thin air and partly not. Andrewedwardjudd (talk) 17:37, 27 June 2011 (UTC)andrewedwardjudd

However there is a big distinction between gold and fiat money. Gold has a limited supply and cannot be created out of nothing whereas a central bank can create money out of nothing. For example, the central bank could obtain gold from nothing by electronically printing money and then using it to buy gold. This is "creating money from nothing" as after they have created the money they have then spent it and are then the owners of gold and have just given away nothing but an electronic signal. Where money would be like gold would be if the person who owned the gold deposited it in a bank and was given an IOU for the gold. That way the IOU would be a substitute for gold so it would be as good as gold. In fact when the central bank buys any asset, it doesn't matter if it is gold or debt, with newly created money they are creating money from nothing.--Caparn (talk) 23:51, 29 June 2011 (UTC)

Money out of nothing implies the ability to create economic power out of nothing. If the government simply spends and people do work then that is money out of nothing. Therefore QE has aspects of out of nothing, when new wealth is placed into the economy and aspects that are not very inflationary, when previously existing wealth is swapped out of the economy.
Without the proper context money out of nothing describes nothing very meaningful in my view.Andrewedwardjudd (talk) 11:11, 30 June 2011 (UTC)andrewedwardjudd
re "Money out of nothing implies the ability to create economic power out of nothing" How does it imply that? that seems a bit of a leap to me, there is no logical implication that would lead to that statement. It just implies that the money is created from nothing, which it is.--Caparn (talk) 13:11, 30 June 2011 (UTC)
If you create the means of exchange, then you have supplied the economic power for the exchange. Money out of nothing therefore implies you have created the economic power for the exchange from nothing. QE however sometimes involves the removal of some economic power and replacing it with a slightly different economic power and cannot be described as from nothing
Andrewedwardjudd (talk) 12:00, 30 June 2011 (UTC)andrewedwardjudd
Huh?? The means of exchange has existed for a long time there is no need to create that again. --Caparn (talk) 13:16, 30 June 2011 (UTC)
You seem to have misunderstood me? If you have no money and i lend you some money then i just enabled the means of exchange of your purchases. Via me you get the economic power to influences prices. *Some* QE does not create the means of exchange for purchases out of nothing. Instead via an asset swap, it provides a more liquid means of exchange with very little inflationary impact. Please review my other comments also if you cannot see what i am saying about QE out of nothing implies the ability to create economic power out of nothing.
With QE no one lends anyone anything. The central bank creates money and uses it to buy assets on the open market.--Caparn (talk) 16:32, 30 June 2011 (UTC)
I am assuming you know very well that i know that in QE nobody is lending anybody anything. Once again i can only ask you to think about what i am sayingAndrewedwardjudd (talk) 16:42, 30 June 2011 (UTC)andrewedwardjudd
Ok, I'm trying to understand your point but Money out of nothing implies the ability to create economic power out of nothing The central bank has no money, it creates it electronically out of nothing and then buys some gold with it. It has created the "economic power" to go out to the open market and buy some gold so it has obtained the gold from nothing.--Caparn (talk) 18:44, 30 June 2011 (UTC)
Yes but how does that impact the economy? Gold gets removed and cash is added. If for example you bury some gold in a hole and counterfeit the equivalent cash will the economy change? And if later you burn the cash and dig the gold up will the economy change?Andrewedwardjudd (talk) 19:47, 30 June 2011 (UTC)andrewedwarjudd
You say "Yes but" so are you agreeing that the money is created from nothing.
And the answer to your first and second questions are it depends: What would you do with the gold if you didn't counterfeit the money? What would you do with the counterfeited money? How much gold is there? Is it is significant proportion of the world's gold so selling it would affect the price of gold? How do investors feel this year about investing in gold? In fact there are some many variables that someone would probably have to invent a model to answer it. This sort of question is probably why economics is not a science but a social science. But answering this is a bit like providing an answer to the question "If a tree falls in the forest and no one is around to hear it does it make a sound?" when the question is just"Do trees fall in the forest?" and the answer to "Is the money the central bank create for QE created from nothing?" is yes. --Caparn (talk) 21:03, 30 June 2011 (UTC)
Another thing you might want to consider is that a bank that has a 100m treasury has huge spending power via that treasury. The treasury is money like. The same would be true of a house that you can sell instantly electronically - but there are no such systems. For treasuries there are. If the treasury was destroyed then something money like is destroyed. In QE, the ability of that treasury to create economic force can be removed from the economy. A deflationary act.
If I buy a US treasury and have access to bank systems then my financial position hardly changes because the treasury is so money like. So even if the feds monetize the debt it still does not make much difference unless they increase the amount they normally spend. When they monetize all government spending i keep my cash wherease previously i would have a cash like bond. Even if i am a private bond holder my bond is like a bank deposit. I just go to the bank and ask them to sell it just like i go to the bank and ask them to transfer a few million to another account.Andrewedwardjudd (talk) 06:13, 1 July 2011 (UTC)andrewedwardjudd
When a government sells its debt by selling treasuries it spends the money it obtains. The government then has no money (the money is back in the economy) and the holders of the treasuries can use it in some circumstances as money, though they will often just hold on to the treasuries to obtain the interest they pay and if they do sell them they sell them for money so the monetary base is not increased, so to class treasuries as as high powered as money is incorrect. However, when the central bank buys the treasuries for QE with new money, the money goes into the economy and increases the monetary base.--Caparn (talk) 12:22, 3 July 2011 (UTC)

"Failed"

Suggest inserting the word "failed" in front of the word "unconventional". After a sustained period of quantitative easing the global economy is now clearly falling away again (with significant additional debt burden). The reason I suggest failed is because, if you look at the original objectives (and new mandate of the Federal Reserve) of job creation and the recent US job figures, then it is an unequivocal failure.

Quantitative easing has failed to counteract the headwinds of deflation because, unlike the great depression, it is caused by global resource diminishment (peak oil, peak food, peak other resources), rather than just the deflation of a credit bubble. There are not enough resources left to keep accelerating the growth (and debt creation) curve. More and more economists are taking a second look at the Austrian School as an alternative to Keynsian theories.

Quantitative easing is now becoming a "naked" byword for debt monetisation, even in the conventional media. It is time this was acknowledged on Wikipedia as well. — Preceding unsigned comment added by 91.195.113.2 (talk) 12:53, 11 July 2011 (UTC)

That's a whole lotta WP:OR. As it stands, this talk page section could've been deleted, instead of being nice and just moving it. BigK HeX (talk) 21:43, 12 July 2011 (UTC)
Even if it has failed, which is debatable, the opening paragraph would not be the place to put this as it is about the process of QE, not an individual case.--Caparn (talk) 23:05, 17 July 2011 (UTC)

Mention of QE3 needed?

The QE3 disambiguation page points to this article, but I don't think there's any reference to QE3. Jo3sampl (talk) 01:36, 18 July 2011 (UTC)

"QE3" refers to a hypothetical third round of quantitative easing by the U.S. Federal Reserve System. So far, there have been only two rounds of easing during the late-2000s financial crisis. QE3 is not mentioned in the article because it has not yet happened and because this article is about quantitative easing in general, not specifically in the United States during the current economic depression. JRSpriggs (talk) 05:38, 18 July 2011 (UTC)

To all -- is it appropriate to send the WP user here when he/she enters <QE3> as a search term? I've encountered this once before with a disambiguation page. I think having the user land on this page and not find the term damages WP usefulness and/or credibility. I gather that removing disam page links can be a problem, so I propose that we add a short section that says that QE3 has been bruited about but is still hypothetical. Jo3sampl (talk) 18:19, 18 July 2011 (UTC)

Good idea. I added a sentence defining the term and citing a reliable source. Lagrange613 (talk) 17:00, 19 July 2011 (UTC)

Recent revert reinstated incorrect conception of money creation

This recent revert by Caparn reinstates an incorrect description of the money creation process. As I've explained to Caparn before, regardless of what a BBC journalist may have written, the basic facts of money creation are indisputable. Money is created when the central bank pays an outside entity. It doesn't matter how much cash a central bank prints, or how much it "credits it's own account with itself", money supply only increases when money leaves the central bank, which occurs when the central bank pays an external institution. This basic fact about monetary economics can be confirmed by checking almost any macroeconomics text book. For example Macroeconomics by Mankiw (2010) p.487 states: "When the Fed buys bonds from the public, the dollars it pays for the bonds increase the monetary base and thereby increase the money supply." Check the article on money creation for other references.

As far as I know, no other central bank except the BOE takes the unnecesary step of crediting it's own account before creating money by paying institutions it has bought from. The BOE may take this technical step, but it is unnecesary and definitely not universal. This document from the BOE actually describes the QE process quite clearly: "The MPC’s decision to inject money directly into the economy does not involve printing more banknotes. Instead, the Bank buys assets from private sector institutions – that could be insurance companies, pension funds, banks or non-financial firms – and credits the seller’s bank account." i.e. QE involves i) buying financial assets, ii) crediting the seller's account. LK (talk) 05:23, 22 July 2011 (UTC)

Actually the Federal Open Market Committee (FOMC) directs the 'Desk' (an office within the Federal Reserve Bank of New York (FRBNY) headed by the System Open Market Account Manager) to have its bond traders buy bonds from other bond traders. These are paid for by checks (or the equivalent) drawn on the System Open Market Account at FRBNY. When these checks are deposited in other financial institutions and cleared through FRBNY the account of that financial institution at FRBNY has increased and thus the monetary base has increased. JRSpriggs (talk) 07:04, 22 July 2011 (UTC)
I believe you're agreeing with me? Money is created and money supply is increased when a check from the FRBNY is deposited into another financial institution. i.e. when money leaves the central bank. LK (talk) 09:11, 22 July 2011 (UTC)
There seems to be a consistent effort to obfuscate this article and hide the simple steps behind quantitative easing. Any mention of "money creation", "inflation", "Zimbabwe" even at one stage "money printing" has been deleted from the article. The references from the BBC and BOE stand as allowable references and are also written in a way to explain (as an encyclopedia should). If you think it should be something different provide the references. As I keep seeing Lawrence Khoo say it's about verifiability not truth, so to go in the article the text must have verifiable references. And LK pointing me to references edited by himself (re:money creation)is not really valid.--Caparn (talk) 09:58, 22 July 2011 (UTC)
Caparn, about this edit, You do realise it contradicts the next line? You do understand that money is created when outside institutions are paid, and not before?
Actually why are you even pushing this issue. I understand that you have a problem with central banks creating money (in your words "out of nothing"). But no one denies that money is being created electronically by central banks. I would just like not to misinform people about how that happens. Money is created by the central banks by their action of purchasing and paying for external assets, not by their action of internally crediting their own internal account (which is totally irrelevant to money supply).
Try a thought experiment. Suppose the Fed prints up one million $10,000 notes. And then it buries it in concrete in a hole in the basement of the Kansas city Fed. Does this affect the economy? Does it create money? Money is created only if that cash leaves the Fed building, i.e. the Fed buys something with it. LK (talk) 09:44, 22 July 2011 (UTC)
Q. Does this affect the economy? A. No
Q. Does it create money? A. Yes.
Consider this, If I take one million $10,000 notes and hide it under my mattress is the money no longer in existence? --Caparn (talk) 09:58, 22 July 2011 (UTC)
I understand that this is what you believe, but please understand that this belief of yours contradicts almost all economics textbooks, handbooks, and academic articles in existence. We should report what is in the standard texts, not what we believe in our heart of hearts to be true.
The mainstream definition of money supply is this: [Cash-in-circulation + Demand deposit balances]. The Fed printing and burying 10 billion in concrete does not change either cash-in-circulation or demand deposit balances, hence money supply is unchanged, money is not created.
The situation is different when you or I hide money in a hole in the ground. The salient difference is that we can always dig it up and spend it. Hence, money supply remains constant if we were to hide money under our mattress. LK (talk) 10:22, 22 July 2011 (UTC)
Actually, there is very little difference, the money is out of circulation while it is under my mattress in exactly the same way the money created by the Central Bank is out of circulation until it's spent. The main point of describing it as creating money then spending it is so it is clear to readers that it is new money that is used to purchase the assets. Nowhere does the description define a significant time between creation and spending so your argument about it not existing for this time is invalid. I really can't understand your obsession with describing things in an indirectional way as possible. You previously made multiple revisions to describe the two-step process of the government selling of bonds and then then bank buying them in the reverse order they occur. --Caparn (talk) 12:58, 22 July 2011 (UTC)
Look, don't take my word for it, read this encyclopedia article on monetary policy, starting at "Mechanics of Monetary Policy". See how they talk about using open market operations to create money supply? No where does it mention 'crediting the Fed's own account with itself' as a method of creating money.
Similarly, look at this article on Money supply in the New Palgrave Dictionary of Economics by Milton Friedman. In the section "The link to monetary policy", he says: "The logical starting point in this process is the central bank's supply of its own liabilities, and it is the central bank's control over the liabilities it issues that gives the supply of money its place in economic policy. ... The primary means by which central banks in most modern economies change the amount of their liabilities outstanding is to purchase, or sell, securities – actions typically called ‘open market operations’." That is, buying and selling financial assets, in order to change the amount of central bank liabilities is the means by which a central bank controls money supply. Again, nothing there about a central bank crediting it's own account, because doing so will not change it's liabilities, and hence will not change money supply.
Here's an article by Anna Schwartz about money supply, which describes the money creation process quite clearly: "To increase reserves, the Federal Reserve buys U.S. Treasury securities by writing a check drawn on itself. The seller of the treasury security deposits the check in a bank, increasing the seller’s deposit. The bank, in turn, deposits the Federal Reserve check at its district Federal Reserve bank, thus increasing its reserves." LK (talk) 11:06, 22 July 2011 (UTC)
I've read money supply. It says "The opposite sequence occurs when the Federal Reserve sells treasury securities: the purchaser’s deposits fall, and, in turn, the bank’s reserves fall." so it makes it sound like selling treasuries decreases the money supply however, it fails to mention that the government spends the money it obtains from the sale of the treasuries which increase the money supply so the net effect on the money supply is zero.--Caparn (talk) 19:49, 22 July 2011 (UTC)
I'ld like to point out that you are arguing that an article from the Concise Encyclopedia of Economics, written by Anna J. Schwartz, one of the foremost monetary economists of our time, is wrong. And that based on your determination that the article is wrong, the article is not a reliable source, and therefore you are correct in your opinion of how money creation works. I hope you see the difficulty in this. LK (talk) 03:26, 25 July 2011 (UTC)
Money creation involves the central bank buying financial assets from outside institutions, paying using a check drawn on itself, thus changing it's liabilities. This is a basic understanding in monetary economics. LK (talk) 11:06, 22 July 2011 (UTC)
Caparn, the problem is that LK is appealing to reliable sources and you're appealing to what you consider to be common sense. The media sources you're citing appear to describe an idiosyncrasy of the UK money creation process. If it were a fundamental part of money creation then everybody would do it, but apparently only the BOE does among the advanced economies. I've proposed a compromise with this edit. LK, you know the sources better than I do so I'd appreciate it if you'd supply some good sources for the last sentence there if this compromise is accepted. (I'm hesitant to use the Econlib source because they seem pretty heterodox over there.) Lagrange613 (talk) 17:55, 22 July 2011 (UTC)

As LK says it's about verifiability not truth. I have provided references stating the process.--Caparn (talk) 19:07, 22 July 2011 (UTC)

I've added "which increase the money supply" to the end of the purchase step. Hopefully this will keep LK from falling off his perch.--Caparn (talk) 19:28, 22 July 2011 (UTC)

Let me try again. Consider two statements: 1. "The BOE credits its own account as part of QE." 2. "Every central bank credits its own account as part of QE." Statement 2 is stronger than statement 1. I claim that the BBC and FT sources support statement 1 but not statement 2. You replaced statement 1 with statement 2, so the burden is on you to prove me wrong. Please (a) argue that the BBC and FT sources support statement 2, (b) provide other sources that unequivocally support statement 2, or (c) self-revert. Lagrange613 (talk) 20:23, 22 July 2011 (UTC)
Lagrange, I accept your argument but it seems you want to change it for something with no references. If you insist put this the BoE explanation of how it does QE but I have already included that it is the spending of the money by the central bank which increases the money supply so there should be no confusion. What is your objection to the current wording?--Caparn (talk) 03:09, 23 July 2011 (UTC)
To Caparn: In one of your responses to Lawrencekhoo above, you said "...the government spends the money it obtains from the sale of the treasuries which increase the money supply so the net effect on the money supply is zero." when describing those open market operations which contract the money supply. This statement of yours is incorrect. The Federal Reserve does not turn around and spend that money it obtains from its secondary sale of treasury securities, rather it is annihilated. Perhaps you are confusing this situation with the United States Treasury's original sale of the treasury securities. After its original sale, the U.S. Treasury does spend the proceeds. JRSpriggs (talk) 07:20, 23 July 2011 (UTC)
JRSpriggs, Yes I agree, I was talking about the sale of treasuries by the government not the sales treasuries when the fed sells them back, which of course is the reverse of QE. I even added the original sentence on QE reversal in a much earlier version of the article. However, there is one government economist who proposes to help solve the American debt problem that the government does not pay back the money on treasuries purchased by the Fed for QE when they mature.--Caparn (talk) 15:09, 23 July 2011 (UTC)
Darx9url, I am reverting your last edit as there is no reference that crediting their own account to create the money is not the way that other central banks do it. For you to say that the BoE have an additional step you have to provide a reference to the steps the other banks take which excludes this step.--Caparn (talk) 17:12, 23 July 2011 (UTC)
Caparn, your reading of WP:BURDEN appears to be exactly backwards. Also, your repeated reverts could be interpreted as edit warring. I await you doing one of (a,b,c) above. Lagrange613 (talk) 17:49, 23 July 2011 (UTC)

Lagrange, re:WP:BURDEN This link from the FT states Central banks credit their own account with new money. It doesn't specify the BoE but "Central Banks" http://www.ft.com/cms/s/0/8ada2ad4-f3b9-11dd-9c4b-0000779fd2ac.html#axzz19A7zyGLE, maybe if you viewed the links that were already referenced we would not be having this discussion.--Caparn (talk) 19:07, 23 July 2011 (UTC)

Darx9url, regarding your last edit it appears you are no longer interested in references when thay contradict your opinion. I suggest you view http://www.ft.com/cms/s/0/8ada2ad4-f3b9-11dd-9c4b-0000779fd2ac.html#axzz19A7zyGLE.--Caparn (talk) 09:37, 24 July 2011 (UTC)
http://www.businessinsider.com/what-is-quantitative-easing-2010-8 A central bank does this by first crediting its own account with money it has created ex nihilo ("out of nothing").
http://business.timesonline.co.uk/tol/business/economics/article5850466.ece 1) The Bank creates new money electronically in its accounts.
http://www.ft.com/cms/s/0/8ada2ad4-f3b9-11dd-9c4b-0000779fd2ac.html 1:28 in: "a central bank money simply creates money at the stroke of a computer key, in effect increasing the credit in its own bank account."
http://duifg.com/index.php?option=com_content&view=article&id=124:quantitative-easing-gilt-in-the-market&catid=58:financials&Itemid=140 Quantitative easing is the process of a central bank generating money by increasing the credit in its own account.
http://adawnjournal.com/2010/11/17/what-is-quantitative-easing/ 1. A central bank will credit its own account with money it creates.
http://lexicon.ft.com/Term?term=quantitative-easing Only a central bank can do this because its money is accepted as payment by everybody. Sometimes dubbed incorrectly "printing money" a central bank simply creates new money at the stroke of a computer key, in effect increasing the credit in its own bank account.
http://www.safepenguin.com/2011/06/08/what-is-quantitative-easing/ QE is possible when a central bank credits its own account.
http://www.bargaineering.com/articles/quantitative-easing.html The central bank essentially credits its own account with new money and uses that money to buy assets from banks
http://avadhootnasikkar.blogspot.com/2011/06/quantitative-easing-and-implications.html
http://www.guardian.co.uk/business/2010/nov/03/quantitative-easing-question-and-answer in effect, created on its own account.
http://uk.ibtimes.com/topics/detail/835/quantitative-easing/ A central bank implements QE by first crediting its own account with money it creates ex nihilo ("out of nothing"). --Caparn (talk) 10:52, 24 July 2011 (UTC)

Since Caparn edit wars to put in wrong information, I've removed the passage, don't put it back until there is agreement. Darx9url (talk) 13:22, 24 July 2011 (UTC)

Darx9url,
  1. It is completely excessive removing the steps
  2. I have provided references as requested
If you want to instate that this is not the way QE takes place just provide references. You seem to have lost all sense of fair play and logic and are now resorting to caveman mentality.--Caparn (talk) 14:17, 24 July 2011 (UTC)
Caparn and Darx: You both need to take a step back and stop edit warring, even if you think you're right. Caparn: You should know that sites mirroring Wikipedia; blogs and other self-published web sites; and undergraduate finance club websites are not considered reliable sources. When you take all those out (as I have just done) all you're left with are UK news sources, which strongly suggests that this is indeed a BOE idiosyncrasy. I don't have time to go source-hunting just now, but I think anyone else who knows of/finds one explaining that it's a BOE idiosyncrasy would be justified in restoring my proposed compromise language or writing up something similar, citing the new source of course. Lagrange613 (talk) 17:58, 24 July 2011 (UTC)
To Caparn: You said "there is one government economist who proposes to help solve the American debt problem that the government does not pay back the money on treasuries purchased by the Fed for QE when they mature.". The twelve Federal Reserve Banks are regarded under U.S. law as private entities (owned by their member banks), albeit highly regulated by the Federal Reserve Board (a government agency). Thus if the U.S. Treasury were to fail to pay off its debts to the Federal Reserve Banks, it would be in violation of the takings clause of the Fifth Amendment (which requires just compensation for takings) and the Public Debt clause of the Fourteenth Amendment (which says that the Public Debt must be paid). Notice that the FR Board of Governors is not a bank and holds no financial assets; all that is done by the FR Banks. JRSpriggs (talk) 20:17, 24 July 2011 (UTC)
I'll see if I can find the link, I didn't pay too much attention to it at the time and thinking about now it it might actually have been a senator who is pushing for it.--Caparn (talk) 22:04, 24 July 2011 (UTC)
Found it, it's a senator called Ron Paul http://www.theburningplatform.com/?p=18965 "We could start by canceling out the debt held by the Federal Reserve, which would clear $1.6 trillion under the debt ceiling."--Caparn (talk) 22:14, 24 July 2011 (UTC)
I must add that Ron Paul also used the "created out of thin air" term when referring to the Fed buying treasury bills for QE, when he says "That's not a real debt, they bought those treasury bills with money created out of thin air we could just write that off or quit paying the interest" at 1:52 in this video http://www.youtube.com/watch?v=MHk-vvsDWnM --Caparn (talk) 00:51, 25 July 2011 (UTC)

Break

Caparn, you are edit warring. You need to stop reverting to your version against the consensus of everyone else here. It's clear that the other editors believe as I do that 'crediting it's own account with itself' is a quirk ideosyncratic to the BOE.

As for what the best reliable sources say (here I include only those sources from central banks and from academic and government economists), they all essentially say that QE invovles the central bank buying financial assets. The process of QE is essentially just one step - the central bank buys financial assets. This action i) creates money (increases the money supply), ii) increases excess reserves of banks, and iii) increases the price, lowering the interest rate of those assets. Accounts written by journalists, partisan organizations and other lay people are unreliable about such an esoteric issue. We should stick with the best sources, monetary economists and documents from the central banks themselves. LK (talk) 02:56, 25 July 2011 (UTC)

To Caparn: Ron Paul is a Representative, not a Senator. (However, his son, Rand Paul an ophthalmologist, is a Senator.) Ron Paul is an obstetrician/gynecologist, not an economist nor a lawyer. Nor has Ron Paul ever been an official of the executive branch. Thus calling him a "government economist" is false.
Although I agree with Ron Paul on many issues, I believe he is wrong to treat the Federal Reserve Banks with such contempt for their rights. He is also wrong to believe that the U.S. Treasury would benefit substantially from ceasing to pay interest to the Federal Reserve Banks since most of that interest is returned to the U.S. Treasury by the Federal Reserve anyway, under the guise of "interest on U.S. currency" issued through the Federal Reserve. JRSpriggs (talk) 06:31, 25 July 2011 (UTC)
Jumping off LK's point about QE really just being one step, none of the cited sources appear to make the three-step breakdown that appears in the article. It's hard to avoid the conclusion that the list of steps is synthesis. Also, come to think of it, the first "step" isn't a step at all, so it's not even particularly well written. Since this is the crux of the section I think it would benefit from a rewrite away from a list of steps and toward a prose description of the open market operations used to execute QE. I'd just be bold and write it in, but since the paragraph's been edit warred recently I thought I'd suggest it here first. Lagrange613 (talk) 06:45, 25 July 2011 (UTC)
I agree with you. You should just do it. Darx9url (talk) 05:25, 26 July 2011 (UTC)
It is important to mention where the money comes from. That it is created electronically by the Central Bank. This is an important feature when hundreds of billion dollars are spent and it now left out of the process.--Caparn (talk) 07:48, 26 July 2011 (UTC)
To JRSpriggs: It says in this wiki article that Ron Paul sits on the Joint Economic Committee, and the House Committee on Financial Services, and is Chairman of the United States House Financial Services Subcommittee on Domestic Monetary Policy and Technology. So it does look like he has some influence over financial policies.--Caparn (talk) 09:56, 26 July 2011 (UTC)

How about a description something like this?:

  1. Prior to QE the Central Bank will put interest rates to a very low level, for example 0.5%
  2. The process of QE is really a one step process where the Central bank buys assets including government bonds from private institutions such as banks and pension funds.
  3. The money used to pay for the assets is created electronically by the central bank at the stroke of a key, this type of money creation can only be performed by central banks that control the currency.--Caparn (talk) 13:05, 26 July 2011 (UTC)
Influence and expertise are two different things. Paul has the first but no credentials to establish the second; hence he's out as a reliable source. A list whose second item begins by saying "this shouldn't be a list" is self-defeating. I see no reason a list is better than prose in that section, but if someone wants to persuade me otherwise I'm happy to listen. Lagrange613 (talk) 16:42, 26 July 2011 (UTC)
A bulleted list of key points that describes the process in understandable and concise terms is very useful. It is useful to say that a prerequisite of QE is a low interest rate and that the money used to purchase the bonds is newly created electronically by the central bank and also that the new money injected into the economy by the purchase of these assets increases the monetary base. --Caparn (talk) 17:04, 26 July 2011 (UTC)
The first point is covered in the preceding paragraph. As for the latter two points, you've said that they're important to include, but you haven't explained why you think a list is better than prose. Lagrange613 (talk) 17:14, 26 July 2011 (UTC)
A list is easier to grasp points from than a paragraph of prose. The way people read articles means that a list of key points, where they are points, is better than several sentences running on from each other. It's to do with how peoples minds work.--Caparn (talk) 17:57, 26 July 2011 (UTC)
Taken to its logical conclusion, this argument calls for all of Wikipedia to be turned into lists, which the community will not go for, in this article or elsewhere. I've written a new explanation of QE into the Process section. Lagrange613 (talk) 18:43, 26 July 2011 (UTC)
Lagrange613, I appreciate your efforts for the process paragraph but, I see nothing about the electronic money creation in the this section, why is this?
If I was reading this process section as a user unfamiliar with QE I would be confused and none the wiser to what QE is. The process section does not even mention the purchasing of assets! The key process of QE. Let's not forget this is an encyclopedea. Tomorrow I will put some text that describes the process in a concise accurate and comprehensible way. This will include the purchasing of assets and the creation of money. --Caparn (talk) 21:44, 26 July 2011 (UTC)
The second sentence of the rewritten paragraph is, "In such a situation, the central bank can continue to purchase bonds or other assets from financial institutions." Given that the paragraph is four sentences long, I am having trouble avoiding the conclusion that you didn't bother to read it. If you do change the paragraph, please tread carefully, as you're just coming off a block for edit warring that section. Lagrange613 (talk) 23:01, 26 July 2011 (UTC)
Lagrange613, Thank you for the unnecessary reminder about the block for edit warring even though I did not break the 3 reverts in 24 hours rule and I was responding to requests from other editors on the talk page that I could put in the text if I could find references to "Central Banks" rather than just the BoE, which I did. I don't think the administrators have enough time to look through the comments in 24 hours and see that all the edits are in response to request from other editors for more references. On the point of putting that a central bank first credits its own account with newly created money that step, documented in several referencable articles including the Financial Times, is a useful step to put in as it makes it clear to the reader that the money used for QE comes from new money that the central bank has created electronically. Your edit has total missed out that this money is newly created. The sentence '"In such a situation, the central bank can continue to purchase bonds or other assets from financial institutions" should be rewritten, the purchasing of assets and the fact the the money is newly created represent the key points of QE. Just saying "can continue to purchase bonds or other assets" makes it too easy to miss as a key point. --Caparn (talk) 01:32, 27 July 2011 (UTC)
I fully support Lagrange's revision. It is straightforward, covers all the important points, and clarifies the situation immensely. A bullet list makes thing more difficult to understand, and, is likely against the policy on synthesis, as no such bullet list exists in any of the sources. I'ld also note that Lagrange's version emphasises the most reliable sources. LK (talk) 03:57, 27 July 2011 (UTC)
LK, your improvements are much appreciated. Lagrange613 (talk) 06:37, 27 July 2011 (UTC)
Incedently I am not the only one who has been accused of edit warring. Lawerence Khoo (talk) was also requested to refrain from editing the QE page for a period of one whole month on 20th June 2011 by administrator 2over0 (talk) for edit warring with another user. This instruction from the administrator has now been deleted from his talk page.--Caparn (talk) 07:38, 27 July 2011 (UTC)
Caparn, please take my comment in the spirit it was given: as advice about going forward, not as an attempt to remind of past misdeeds. Likewise, please refrain from doing this yourself. Lagrange613 (talk) 08:21, 27 July 2011 (UTC)
Caparn, please try not to write mis-truths about me. As you can see from my talk page, the conversation that I had with 2over0 is still there, I did not delete it. And it was not an 'instruction from an administrator', rather it was a request to all parties to take (I quote) "a voluntary unilateral no-fault one month break". Note, that I did not edit here for a month, unlike the other parties, who continued to argue here even after I disengaged. LK (talk) 09:31, 27 July 2011 (UTC)
LK, Ok I take back the bit about you deleting it, I really thought you had. As for others carrying on while you did not edit the page "Unilaterally" does mean that you do it without everyone else. You also forgot to include the bit after that said "This is a request for voluntary action, but please be aware that any further edit warring may result in you being blocked from editing." Anyway, I'm hoping we can put all this to the side and proceed without any more edit warring. --Caparn (talk) 09:55, 27 July 2011 (UTC)
"Unilaterally"[1] in this case means that I decide what to do myself. It does not mean, as you imply, that I alone, was asked. I'ld like to point out that 2over0 made the same request of the other parties in the dispute. I alone honored his request.
In any case, this is all off-topic. The crux of the matter, Caparn, is that you should not be edit warring. LK (talk) 11:16, 27 July 2011 (UTC)
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