@General

How Money is created

Monetary & Quantitative Easing

So I just finished creating this diagram showing what Quantitative Easing and Monetary Easing is and more generally how new money is created and put into circulation, thus increasing the money supply.

@freemo @General
It's fairly easy to see how both these practices lower the interest rate and inflate the stock market. So it's a practice which rewards the higher risk of the market while penalizing the more conservative (usually older) investor. Are risk takers worthy of that much better deal? Is there a limit where these practices inherently produce instability in the economy?

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@dvdmoore

To which practice are you refering to? All money creation, QE, ME, discount rate adjustment, reserve rate adjusement? I touch on several methods that all increase money supply so you have to be more specific.

I am posting ina few minutes a much improved version of the chart, it may make it clearer.

@General

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@freemo @General
Monetary easing massively increases demand for bonds by govt purchases, and thus raises their price which lowers their yield. Quantitative easing, according to your chart, massively increases government investment in the stock market, raising prices by increasing demand. Both monetary, and quantitative easing suppress the yield on bonds and reward investment in the more volatile stock market. So bonds languish as a viable investment whereas stocks rise.

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