How Many Ways Can We Prove It Doesn’t Work

So thorough is the unwinding, they don’t know what to do about it. By “they” I mean policymakers, economists, the media, etc. For years, monetarism has been described as money printing, therefore all that was necessary was just the threat. Then the events of August 2007 intruded, and what was implicit became explicit. Central banks globally responded, since the wholesale/eurodollar system is intricately interconnected, and failed spectacularly. Despite that, they were given another chance due to the dire nature of the circumstances.

Figurative money printing as a threat has been turned real, except that what central banks actually “print” isn’t money or even currency. It is just one form of bank liability; it proved entirely ineffective in 2008, and as if that judgment needed further confirmation global central banks have amply supplied it in the years since. In Europe, the ECB has taken a seemingly more radical approach with both QE and NIRP, but the end result is exactly the same.

Economists tell a very basic story with money printing, as inflation expectations. It is absolutely logical and contains sufficient internal consistency as to be plausible. If any entity prints money the result should be rising prices, the old adage of more money chasing fewer goods. Modern economists (Keynesians through the monetary form) have added another logical piece, namely that consumers and businesses respond to the threat of money printing by buying goods or increasing production ahead of the expected wave of rising prices. That, then, creates a burst of economic activity that will lead to the virtuous circle that we know as the sustainable growth period or boom.

There is much more debate about the theory towards the end than the beginning, however none of that matters if what is in the beginning is just plain false. The whole intended sequence falls apart if there is no actual money printing; if central banks only create inert numbers on a ledger balance sheet, the story would be entirely different as everyone is belatedly figuring out.