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 Central banks have led the public and the political class to believe 

... that quantitative easing (QE) was tantamount to printing money, and that it could be reversed painlessly once the deflation threat had passed.

The process is not remotely equivalent to printing bank notes. The central banks have conducted QE in such a way that there is a liability owed to commercial banks on the other side of every bond purchase. That liability is contracted at floating rates.

The US Federal Reserve, the Bank of England, and the European Central Bank, among others, have borrowed short to buy long. This is a variant of the maturity mismatch that blew up Northern Rock and Lehman Brothers

ING says the Fed has incurred a paper loss of $1 trillion this year on its $8.7 trillion balance sheet of US Treasuries and mortgage debt. 

This is going to be hard to explain to Congress.

Ambrose Evans-Pritchard Telegraph 7 November 2022 


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