Talk:Quantitative easing/Archive 2

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Question - Price paid for bonds by Fed

When the Fed buys bonds back from the private banks during QE do they make public how much they have paid for the bonds and what the face value of the is? If so does anyone know where this information is or just the total difference? --Caparn (talk) 01:45, 1 January 2011 (UTC)

Recent reversions

An IP editor has made a change to the article and has been reverted multiple times by multiple editors. I'm hoping this section will prompt some discussion from the IP and responses from the various editors about this before it devolves into an edit war.

Original text:

1. The national bank declares an extremely low rate of interest, for example 0.5%.

2. The national bank issue government bonds and gilt to banks and other lending institution

3. The Government borrows money which is then used to buy back the issued government bonds from financial firms such as banks, insurance companies and pension funds.

Revised text:

1. The national bank declares an extremely low rate of interest, for example 0.5%.

2. The national bank credits its own bank account with money created from 'thin air', probably just by adding to a number on its computer.

3. The newly created money is then used for buying government bonds from financial firms such as banks, insurance companies and pension funds.

Ravensfire (talk) 16:43, 19 May 2010 (UTC)

The initial text was actually the "Revised Text" until someone changed it. It now keeps getting reverted to the incorrect version. Point 2 in "Original Text": "2. The national bank issue government bonds and gilt to banks and other lending institution" This is not part of the quantitative easing process but part of the general process of selling bonds (also they are not issued they are sold") Point 3 in "Original Text": "The Government borrows money which is then used to buy back the issued government bonds" This is incorrect as the money is not borrowed but created by adding to a number on a computer. See here: http://news.bbc.co.uk/1/hi/business/7924506.stm and here I have reverted the change to the correct version (which was in for months before it was edited by one person and then not allowed to be reverted. Please don't revert it again until you actually check how Quantitative Easing works! —Preceding unsigned comment added by 88.106.67.186 (talk) 08:32, 20 May 2010 (UTC)

You obviously have no idea what you're talking about and are parroting a BBC article. There's no money created from thin air or zero added anywhere, the FED uses the primary dealer reserve funds to conduct these operations. It's all right here:http://www.frbsf.org/education/activities/drecon/answerxml.cfm?selectedurl=/2010/0310.html If you don't know accounting or economics, you should NOT be editing any of this. Right now the how section is pure garbage. ~PM (BS Economics 2006, MA Applied Economics 2008, Investment Analyst at 60B institutional fund.)

~ —Preceding unsigned comment added by 99.70.28.243 (talk) 05:01, 7 December 2010 (UTC)

Ravensfire do you now admit that the following is incorrect now? "The Government borrows money which is then used to buy back the issued government bonds from financial firms such as banks, insurance companies and pension funds." regarding the government borrowing money whereas they do in fact create money? --Caparn (talk) 18:46, 7 January 2011 (UTC)

Central banks do not "first credit their account with money they created ex nihilo"

I find the following sentence from the article seems imprecise and misleading, if not plain wrong:

"A central bank implements QE by first crediting its own account with money it has created ex nihilo ("out of nothing").[1]"

In open market operations, central banks buy assets simply by creating central bank liabilities. The net worth of the central bank is not affected since through the purchase, both assets and liabilities are increased by the same amount.

Central banks do not "first credit their account with money created ex nihilo" to make purchases simply because central bank money is not an asset of the central bank, but rather its liability. It is an asset for commercial banks and non-banks, of course. But not for the central bank, as one look at the balance sheet of any central bank will clarify at a glance. "Federal Reserve Notes" are on the liabilities side of any Federal Reserve Bank (see here).

The only exception to this are coins, which indeed are assets for the central banks as well. But their quantity is neglegible, and they are not used for open market operations.

I suggest rewriting the sentence above as follows:

"A central bank implements QE by buying assets it would normally not buy. In this transaction, the central bank's assets increase, while its liabilities (which equal the "newly created" central bank money) increase by the same amount. In this balance sheet extension, the central bank's net worth remains identical." Thewolf37 (talk) 00:06, 25 September 2010 (UTC)

For the WP:LEAD this might be overly technical. I for one don't understand exactly what you're saying. Greg Ip, in his publication The Little Book of Economics, words it like this "Between 2008 and 2010, [the Fed] bought $ 1.75 trillion worth of Treasury bonds and mortgage-backed securities by printing money. Its balance sheet ballooned from under $1 trillion to over $2 trillion and banks' reserves skyrocketed from almost nothing to more than $ 1 trillion. When a central bank shifts its focus to expanding its balance sheet through bond purchases rather than targeting short-term interest rates, it is called quantitative easing."[1] I think it is more accessible to omit asset/liability wording from the lead, unless we can make it accessible. Why not just say "A central bank implements QE buying bonds with money it has created ex nihilo ("out of nothing")"? Thanks. -Shootbamboo (talk) 16:21, 25 September 2010 (UTC)

Ok, my version might be overly technical for the WP:LEAD. I find the version you suggest more accurate than "A central bank implements QE by first crediting its own account with money it has created ex nihilo.". Sounds ok to me for the WP:LEAD.

Still, "creating money ex nihilo" will probably be misleading for most people because they assume that central bank money always is an Asset. That is true for all non banks and commercial banks, but not for the central bank. The money a central bank creates is a liability (financial accounting) of the central bank, as a quick glance at any central bank's balance sheet will easily clarify. Federal Reserve Notes, for example, are found on the liabilities side of the Fed's balance sheet.

A lot of people assume that central bank money will be an asset for the central bank simply because they know it represents an asset on the balance sheets of individual businesses and commercial banks (which they are familiar with), but they never took a close look at a central bank's balance sheet. The phrase "money created ex nihilo" suggests the central bank can create assets or value for itself "out of nothing", which is not the case. What the central bank creates "out of nothing" is its liabilities (=central bank money, which are claims against the central bank). The phrase you cite from "The Little Book of Economics" is imprecise and misleading. The Fed bought treasuries and mortgage-based securities not by "printing money", but by creating central bank liabilities. Its balance sheet "ballooned" because both assets and liabilities were increased by the same amount as a result of the purchase. The net assets (assets minus liabilities) remained the same, though. Thus, money creation does not imply the creation of "value" out of nothing.

I think it would be a good idea to clarify this, as it is a source of many inaccurate misconceptions about money creation. If not in the WP:LEAD, then maybe in the section "concept": "When the central bank purchases assets in order to implement quantitative easing, those assets are paid for by creating central bank liabilities which equal central bank money. While this increases both the assets and liabilities side of the central bank's balance sheet by the value of the asset that was purchased, it does not change the central bank's equity (net assets = assets minus liabilities)." Thanks, Thewolf37 (talk) 21:54, 25 September 2010 (UTC)

Confusion about creating money

Judging by a lot of the comments in this discussion there seems to be a complete lack of understanding by some people that the central bank does just create new money "out of nothing" to make the purchase of bonds, even though it is documented in hundreds of news articles and research papers, it does this by electronically updating its own account to add more money on it's own computer system (only a central bank can do this). To make the article clearer I feel it is essential to have a something describing exactly how central bank creates the new money electronically. I thought it would be good to describe it as electronically creating money "out of thin air" by just adding a number to their own account on a computer, a description that I think most people would understand, but this has caused objections to it being unencyclopedic (User:Lawrencekhoo), politically inflammatory (User:Ntotten), complete garbage (User:DelosFord), some people even think it is incorrect (User:Mdestito) someone (User:Pavelmalik) even claims they have a BS Economics 2006, MA Applied Economics 2008 and work as Investment Analyst at 60B institutional fund (which I find incredible that they could lack such basic knowledge). Has anyone got a better way to describe money creation for QE? --Caparn (talk) 19:14, 1 January 2011 (UTC)

Well, I think the the technical term used is that the central bank expands its balance sheet. I am not sure this comes closer to the jargon free explanation you are looking for. Maybe it should just say the central bank creates money, with a link to money creation, which it then uses to buy up assets. I don't know, it might be helpful with some more people weighing in on this, when explaining any technically advanced subjects one is always faced with the difficult task of balancing of accessibility to a general audience and faithfulness to technical correctness.TheFreeloader (talk) 19:41, 1 January 2011 (UTC)

I don't think a link to money creation will suffice as this also covers expanding the money supply with money multiplication and fractional reserve banking so the distinction would be lost. Also, "expands its balance sheet" would not be understood unless it had an explanation of how this is achieved and there are other ways a central bank can expand their balance sheet other than by printing money. --Caparn (talk) 20:32, 1 January 2011 (UTC)

You might be right, but I will agree with the other with some of the other people cite, that to say that the money are created "out of thin air by just adding a number to their own account on a computer" is unencyclopedic and does seem like a veiled criticism of the process. But maybe if the same thing could be said in a more neutral manner, that might work.TheFreeloader (talk) 14:59, 2 January 2011 (UTC)

Yes, I can see it is taken by some as "like a veiled criticism of the process" but it is really not meant to be, How money is credited to the central bank's account should be explained clearly and not just in economic euphemisms. For example, if someone told you when you go online to do some banking and you take money out of your current account to put it in your savings that there is a program that subtracts the number from your current account and adds it to your saving account you wouldn't think it was a critisism just how it is. But when the same is said about how QE is performed by adding to an account without subtracting from another one it is seen as a critisism? I see it nothing other than clearly saying how it is done and removing any misconseption like a lot of people seem think that the private banks first deposit their excess reserves with the central bank and the central bank then uses these reserves to buy the assets. --Caparn (talk) 16:23, 2 January 2011 (UTC)

Comparison with other instruments/Printing Money

This section originally had both the differences and similarities between printing money and QE. Now the similarities have been deleted, the reason given is OR/POV. Listed below are the following points with references as to why they are neither original-research or point-of-view and also why they are worth including in the article. First the original text below:

Printing Money
Although quantitative easing is often nicknamed "printing money", the use of the newly created money is different in QE. Traditional QE specifies that the newly created money must be used for buying government bonds, whereas the term "printing money" usually implies that the newly minted money is used to directly finance government deficits (pay off government debt). This is known as "monetizing the government debt", but it is a distinction without a difference, when the central bank buys bonds using QE, one arm of the government is buying up debt owed by another arm of the government in exchange for money created by the central bank. Whether the bond is brand new, or from the secondary market, is quite simply irrelevant. Many analysts call this two-step QE process of selling bonds and buying them back with newly created money as "monetizing the government debt". That said there are big practical differences between this policy and Zimbabwe-style money financing. The most important is that the central bank is choosing to buy bonds as a means to an end. It is not being forced to buy them because the government has nowhere else to go. Also - and crucially - the central bank has every intention of unmonetising the debt when the economy has recovered. In other words, it's going to sell it all back. It is against the law in all the nations/states that have performed QE (USA, UK, Japan and EU) to print money to finance government debt so QE could be used as a way to get around the law. The only effective way to determine whether a central bank has monetized debt is to compare its performance relative to its stated objectives. Many central banks have adopted a numerical inflation target. If inflation is running above the target when the government is faced with a debt-financing issue, one might suspect that the central bank is monetizing the debt. In general, the more explicated a central bank is about its policy objectives, the easier it is to determine whether it is monetizing the debt.

Comparison of QE with Moneterizing Debt

In this document by Daniel L. Thornton (Vice President and Economic Adviser to the Federal Reserve Bank of St. Louis) wrote:

"The Fed would effectively be financing deficit spending by “printing” money. It would simply be a two-step process: The government would sell debt to the public and the Fed would exchange the public’s holdings of government debt for money. Many analysts call this twostep process “monetizing the debt.”"

"The only effective way to determine whether the Fed (or any central bank) has monetized debt is to compare its performance relative to its stated objectives. Many central banks have adopted a numerical inflation target. If inflation is running above the target when the government is faced with a debt-financing issue, one might suspect that the central bank is monetizing the debt. The Fed has not adopted a specific numerical inflation target, which makes it more difficult to determine whether its actions are purely motivated by its policy objective. In general, the more explicated a central bank is about its policy objectives, the easier it is to determine whether it is monetizing the debt"

http://research.stlouisfed.org/publications/es/10/ES1014.pdf.
In November 2010 Richard W. Fisher President of the Federal Reserve Bank of Dallas said

"After deliberation, the majority of the committee concluded that under current and foreseeable conditions, the better approach was to purchase $600 billion in Treasuries between now and the end of the second quarter of next year, on top of the amount projected to replace the paydown in mortgage backed-securities. The math of this new exercise is readily transparent: The Federal Reserve will buy $110 billion a month in Treasuries, an amount that, annualized, represents the projected deficit of the federal government for next year. For the next eight months, the nation’s central bank will be monetizing the federal debt."

http://dallasfed.org/news/speeches/fisher/2010/fs101108.cfm

A BBC article by Stephanie Flanders, BBC economics editor wrote:

"But it is a distinction without a difference. When the Bank of England buys up gilts, one arm of the government is buying up debt owed by another arm of the government in exchange for money created by the central bank. Whether the gilt is brand new, or issued the day before, is quite simply irrelevant."

"That said, there are big practical differences between this policy and Zimbabwe-style money financing. The most important is that the Bank is choosing to buy gilts as a means to an end. It is not being forced to buy them because the government has nowhere else to go. Also - and crucially - the Bank has every intention of unmonetising the debt when the storm is past. In other words, it's going to sell it all back."

http://www.bbc.co.uk/blogs/thereporters/stephanieflanders/2009/02/obtaining_the_right_to_print_m.html

Legality Of Printing Money to Buy Debt Directly From Government

BBC article states:

"the Bank of Japan was legally forbidden to buy debt directly from the Ministry of Finance when they undertook QE in the 1990s"

"the Bank of England faces the same legal constraint: Article 101 of the Maastricht Treaty forbids direct central bank financing of deficits."

http://www.bbc.co.uk/blogs/thereporters/stephanieflanders/2009/02/obtaining_the_right_to_print_m.html

research.stlouisfed.org states:

"The Fed is forbidden by law to purchase government securities directly from the government. The government first sells securities to the private sector and the Fed then purchases securities from the private sector, specifically, government securities dealers."

http://research.stlouisfed.org/publications/es/10/ES1014.pdf

Changes to Printing Money Subsection

All of this is neither original-research nor point-of-view as it is all verifiable referenced facts. It is worth including in the article so people can see both the differences and likenesses of QE to monetizing the debt. --Caparn (talk) 22:56, 4 January 2011 (UTC) If you think any of this is POV or OR please state here in this discussion and don't just revert the article. I'm sure I can find plenty more references for these points if required. --Caparn (talk) 23:16, 4 January 2011 (UTC)

The above sources are good. And a non-POV non-OR addition can certainly be written based on those sources. The trouble here is that, when faced with an objection to your edit, instead of rewriting it to fix problems with POV and OR, you have continually reintroduced it against the objection of 3 other editors. Discuss how to fix it, and propose a new version. Eventually we will have something that all agree with. See WP:BRD for how this is supposed to work. Don't just continually reintroduce your preferred version. It will just be continually reverted as long as the problems remain unfixed. LK (talk) 08:03, 5 January 2011 (UTC)

I've added the information in a neutrally worded way, removing POV language and synthesis to advance a position. Please compare the two to see what me and the other editors see as the the POV and OR problems with your original edit. LK (talk) 09:37, 5 January 2011 (UTC)

LK I agree with your edits, I don't think the original one was POV though, I had a look through the synthesis section and I can see how taking bits from different articles and stringing them together can push forward a case but I didn't think I was doing this as there are plenty of article that state that QE is monetizing debt. The sentence "However, excessively buying government bonds from the secondary market can in-effect monetize the debt." would be better slightly reworded without the "excessively" and with "is" instead of "can": "However, buying government bonds from the secondary market is in-effect monetize the debt." --Caparn (talk) 14:44, 5 January 2011 (UTC)

Thanks for finding the common ground on this, LK. Ravensfire (talk) 15:03, 5 January 2011 (UTC)

Regarding reversion of revision 406297219 reason given "not according to the sources, monetizing debt = buying debt while inflation is high.": The sentence after reversion read: "However, excessively buying government bonds from the secondary market can in-effect monetize the debt." and before the reversion was reworded without the "excessively" and with "is" instead of "can" to be: "However, buying government bonds from the secondary market is in-effect monetize the debt." undone by LK.

1. Reason given in audit trail states nothing to do with the "excessively" but "high inflation".
2. Reason given in audit trail states "not according to the sources". But any buying of bonds by the government with newly created money is monetizing debt according to the sources: article by Stephanie Flanders BBC economics editor in relation to buying bonds from the secondary market compared to direct from the government: "But it is a distinction without a difference. When the Bank of England buys up gilts, one arm of the government is buying up debt owed by another arm of the government in exchange for money created by the central bank. Whether the gilt is brand new, or issued the day before, is quite simply irrelevant.". http://www.bbc.co.uk/blogs/thereporters/stephanieflanders/2009/02/obtaining_the_right_to_print_m.html I will undo the undo. --Caparn (talk) 08:40, 7 January 2011 (UTC)

It's simple, your edit "government bonds from the secondary market is in-effect monetize (sic) the debt", essentially states that when the central bank buys government bonds from the secondary market, this is monetizing the debt, everywhere and always. However, central banks buy government bonds from the secondary market all the time. They do this as part of normal monetary policy, not just QE. Buying government bonds can only be considered "monetizing the debt" if the central bank is buying bonds when i) inflation is above target, and ii) the government has trouble borrowing money. This is all explained quite clearly in the article that you yourself have cited.[2]

It appears that you either don't read the articles that you cite, or that you lack the necessary background in monetary economics to understand these issues. Your edits show that you have a certain POV to tell. This is just creating unnecessary work for the rest of us. As a favor, in the spirit of creating a good encyclopedia, could you edit some other articles instead? Thanks, LK (talk) 10:28, 7 January 2011 (UTC)

LK It appears that you lack some understanding. It is true that "Buying government bonds can only be considered "monetizing the debt" if the central bank is buying bonds with newly created money". But if for example it is buying them back with tax payers money this is not monetizing debt. And the change you made refered to "excessive" --Caparn (talk) 10:47, 7 January 2011 (UTC)

re: "Your edits show that you have a certain POV to tell". I absolutly have no POV apart from an NPOV point to put across. Some of the editors which you are quite happy with put blatently incorrect statements up. For example "The money for QE comes from the excess bank reserves". Everything I have said is true with references, you use non-true, inconsistent and illogical arguments to put your case across. For example the last edit you reinstated "excessively" and gave the reason as "high inflation". How are those two related? I responded with one of the "sources" which says buying bonds from the secondary markets is the same as buying them direct from the government. What is the government doing, if it creates money to buy government debt directly from the government, other than monetizing debt? --Caparn (talk) 11:09, 7 January 2011 (UTC)

PS: Perhaps it's you LK who should find another article to edit --Caparn (talk) 11:11, 7 January 2011 (UTC)

PPS: Supporting my edit the article the reference you have just added to support your case (http://research.stlouisfed.org/publications/es/10/ES1014.pdf) also states: "The Fed would effectively be financing deficit spending by “printing” money. It would simply be a two-step process: The government would sell debt to the public and the Fed would exchange the public’s holdings of government debt for money. Many analysts call this twostep process “monetizing the debt.”" --Caparn (talk) 11:31, 7 January 2011 (UTC) LK, Also if you look at the original paragraph I put in (listed at the top of this section) it says nothing that the articles I reference didn't already say. And your argument about synthesis being used is extremely weak. You really needn't bother with your "getting tired of being the one that has to fix things" when there is nothing needing fixing. --Caparn (talk) 13:58, 7 January 2011 (UTC)

I think that is kind of a bad example you are using there, as what the writer of the essay is actually saying, is that this definition of "monetizing debt" is a bad one, as like LK pointed out, this sort process is constantly occurring in a modern monetary system. He then goes on to say that what one has to look at to determine if a central bank is "monetizing government debt" is the goal with their expansion of the money supply. Is it to done bring down the borrowing costs for the government, or done for the sake of stabilizing the economy in some other fashion (e.g. price stability). Even though the author of the essay, Daniel Thornton, does present the view that quantitative easing is monetization of government debt, I think it very dishonest to use the essay to prove that point, as his actual opinion is that that view is wrong and the only reason he presents the view in the first place is to disprove it.TheFreeloader (talk) 14:14, 7 January 2011 (UTC)

No, the author doesn't say it's a "bad" description but "narrow and uninteresting". Yes Freeloader, I absolutly agree with you that "what one has to look at to determine if a central bank is "monetizing government debt" is the goal with their expansion of the money supply. Is it to done bring down the borrowing costs for the government, or done for the sake of stabilizing the economy in some other fashion (e.g. price stability)." which is pretty much what it what originally said in my initial paragraph put in that I've also put at the top of this section. "The only effective way to determine whether a central bank has monetized debt is to compare its performance relative to its stated objectives. Many central banks have adopted a numerical inflation target. If inflation is running above the target when the government is faced with a debt-financing issue, one might suspect that the central bank is monetizing the debt. In general, the more explicated a central bank is about its policy objectives, the easier it is to determine whether it is monetizing the debt." --Caparn (talk) 14:34, 7 January 2011 (UTC)

Well, no matter the adjectives used, the point is that he doesn't support that definition of "debt monetization". I am not sure how paragraph you suggest last is an improvement over the current wording. To me most of what is extra in there is kinda beside the point for the purposes of this article.TheFreeloader (talk) 14:59, 7 January 2011 (UTC)

TheFreeloader, Well if you do actually read the whole article you will see he argues that purchasing mortgage backed securities (MBS) is also monetizing debt, so he actually expands the definition of "monetizing debt" from just buying government bonds with newly created money to also buying MBS with newly created money . Which still leaves buying government debt with newly created money as something entirely encased within "monetizing debt". --Caparn (talk) 15:11, 7 January 2011 (UTC)

But I think the way the way he uses italics there is used to indicate that this is according to that earlier mentioned "narrow and uninteresting" definition of "monetizing debt". Else it would not give any meaning that he then goes to suggest another definition of "debt monetization", that is one where one takes into account the goal of the central bank with the increase money supply.TheFreeloader (talk) 15:25, 7 January 2011 (UTC)

TheFreeloader, He uses "narrow" for the initial description as he expands it to also include buying MBS. He also says "Many analysts call this twostep process “monetizing the debt.”". Do you agree that printing money to buy debt is "moneterizing debt" even if it is also stimulating the economy? My edits have never said it does not stimulate the economy just that it is also moneterises debt, the decription does not exclude it both "stimulating the economy" and "monetizing debt" but it's very difficult to argue that it is not monetizing debt along with the other things it is doing. I think this has to be made clear because some people seem to disagree that money is even created for QE (just look at some of the comments above in this discussion). --Caparn (talk) 15:49, 7 January 2011 (UTC)

I still think this definition of "debt monetization" is inflammatory and should be avoid, as "monetizing debt" brings to mind situations where the money supply is increased to keep up with mounting public debt. And as the essay explains, that is not necessarily the aim of quantitative easing. I do not see how furthering the use of a bad definition of "monetizing debt" helps explain that money creation is a part of the quantitative easing process.TheFreeloader (talk) 16:14, 7 January 2011 (UTC)

That's a good point; I agree. bobrayner (talk) 16:46, 7 January 2011 (UTC)

Let's not take this out of context either, the specific bit of the article is to do with comparing printing money to QE. It initialy said the differences: "That said there are big practical differences between this policy and Zimbabwe-style money financing. The most important is that the central bank is choosing to buy bonds as a means to an end. It is not being forced to buy them because the government has nowhere else to go. Also - and crucially - the central bank has every intention of unmonetising the debt when the economy has recovered. In other words, it's going to sell it all back." and it stated the similarities which seem to be the point of contention here. And then a good way to effectively determine if the bank primarily purpose is to "monetize debt" or stimulate the economy: "The only effective way to determine whether a central bank has monetized debt is to compare its performance relative to its stated objectives. Many central banks have adopted a numerical inflation target. If inflation is running above the target when the government is faced with a debt-financing issue, one might suspect that the central bank is monetizing the debt. In general, the more explicated a central bank is about its policy objectives, the easier it is to determine whether it is monetizing the debt." So it had all aspects, similarities, differences and how to determine if it is moneterizing debt so I can't see how anyone could call it POV. --Caparn (talk) 17:09, 7 January 2011 (UTC)

The sentence in the article "However, excessively buying government bonds from the secondary market can in-effect monetize the debt." is incorrect as it includes the word "excessively" and "can", the sentence needs to be changed to "However, buying government bonds from the secondary market with newly created money is in-effect monetizing the debt." The key here is not excessive but any buying of government debt with newly created money is "monetizing debt". Please also see the following references:

1. The definition of monetizing debt is given as: "Monetizing debt is thus a two step process where the government issues debt to finance its spending and the central bank purchases the debt from the public."
2. It would simply be a two-step process: The government would sell debt to the public and the Fed would exchange the public’s holdings of government debt for money. Many analysts call this twostep process “monetizing the debt.” http://research.stlouisfed.org/publications/es/10/ES1014.pdf
3. But it is a distinction without a difference. When the Bank of England buys up gilts, one arm of the government is buying up debt owed by another arm of the government in exchange for money created by the central bank. Whether the gilt is brand new, or issued the day before, is quite simply irrelevant. http://www.bbc.co.uk/blogs/thereporters/stephanieflanders/2009/02/obtaining_the_right_to_print_m.html
4. To convert government debt from interest-bearing securities into money. Although both the securities and the money are considered government debt, the latter can be used to purchase goods and services. Thus, monetizing the debt is considered an inflationary process and, although it may temporarily depress interest rates, it is likely to result in higher interest rates and lower bond prices in the long run. http://financial-dictionary.thefreedictionary.com/Monetize+the+Debt
5. http://economistsview.typepad.com/economistsview/2005/09/what_is_debt_mo.html
6. To convert government debt from interest-bearing securities into money. Although both the securities and the money are considered government debt, the latter can be used to purchase goods and services. Thus, monetizing the debt is considered an inflationary process and, although it may depress interest rates temporarily, it is likely to result in higher interest rates in the long run. http://business.yourdictionary.com/monetize-the-debt
7. In November 2010 Richard W. Fisher President of the Federal Reserve Bank of Dallas said: "For the next eight months, the nation’s central bank will be monetizing the federal debt." http://dallasfed.org/news/speeches/fisher/2010/fs101108.cfm

Here is an example to show how incorrect it is, if "excessively" were correct (which it is not), from what Richard W. Fisher said (see above) this would mean from this "excessively" definition that the Fed is buying excessive amounts of debt. Perhaps you would like to add to the article the following sentence: "The Fed is currently buying excessive amounts of government debt"? If you need more references I can provide them. --Caparn (talk) 11:48, 8 January 2011 (UTC)

I really have no idea why you want to keep further this bad definition of "monetizing debt". We have already seen that this definition is utterly meaningless, as it does not distinguish between normal central bank activities and situations where the money supply is expanded with the one goal of keeping interest rates down on public debt. Most of the sources you cite also try to make this distinction, a distinction you are trying to blur, between superficially similar monetary policies but with different aims. Thornton in the St. Louis Fed piece says: "I suggest that monetizing the debt depends crucially on the purpose of the Fed’s (or any central bank’s) actions" and "I suggest that an economically meaningful definition of “monetizing the debt” must be based on the Fed’s motive for increasing the money supply.". Flanders in the BBC blog says that: "That said, there are big practical differences between this policy and Zimbabwe-style money financing. The most important is that the Bank is choosing to buy gilts as a means to an end. It is not being forced to buy them because the government has nowhere else to go.". And Richard Fisher also tries to make this distinction (although more subtly), when he also indirectly says that it is the purpose of the buying of government debt (yield rate target) that makes it debt monetization: "One cost is the risk of being perceived as embarking on the slippery slope of debt monetization. We know that once a central bank is perceived as targeting government debt yields at a time of persistent budget deficits, concern about debt monetization quickly arises.".

Also, none of the sources you cite make the distinction you try to make, that debt monetization is only when the purchasing is done with newly created money, because indeed, as the St. Louis Fed piece says, whenever the Federal Reserve does any open market operation it is either creating or destroying money("When the Fed purchases securities the stock of high-powered money (also known as the monetary base) increases.3 When it sells securities the monetary base decreases.").TheFreeloader (talk) 14:47, 8 January 2011 (UTC)

TheFreeloader, This not a "bad" (bad is your POV) but the "standard" definition of "monetizing debt". In the initial article I also included "That said, there are big practical differences between this policy and Zimbabwe-style money financing. The most important is that the Bank is choosing to buy gilts as a means to an end. It is not being forced to buy them because the government has nowhere else to go." and I included "The only effective way to determine whether a central bank has monetized debt is to compare its performance relative to its stated objectives. Many central banks have adopted a numerical inflation target. If inflation is running above the target when the government is faced with a debt-financing issue, one might suspect that the central bank is monetizing the debt. In general, the more explicated a central bank is about its policy objectives, the easier it is to determine whether it is monetizing the debt." It just does not have to be excessive.

For example, if the central bank sells $10 debt to a private bank, and then buys it back with $10 newly created money the central has $10 it never had before, the private bank is no different so the central bank has monetized $10', and $10 is not an excessive amount by any stretch of the imagination! Excessive is just plain incorrect.

If you want excessive, do you also want to add "For the next eight months, the nation’s central bank will be buying excessive amounts of government debt"? from what was said by Richard W. Fisher President of the Federal Reserve Bank of Dallas: "For the next eight months, the nation’s central bank will be monetizing the federal debt."? --Caparn (talk) 15:11, 8 January 2011 (UTC)

TheFreeloader, I see you have changed the text to remove "excessive" but it really now seems to be beating around the bush with "However, buying government bonds from the secondary market can also in-effect under some circumstances monetize government debt.". That must mean there must exist a circumstance where it doesn't monetize government debt. Can you give me one example where it doesn't monetize the debt? We can then analyse this example and find out what has happened to the debt. --Caparn (talk) 15:27, 8 January 2011 (UTC)

I am not sure that there is a standard definition for "monetizing debt", but if there were to be one, I would certainly prefer the one suggested by Daniel Thornton in the St. Louis Fed essay, to the inflammatory and utterly meaningless definition you are trying to insert into this article. I agree that excessive might not be the right word (which is why I didn't add it again), as excessive buying could just as well can come from incompetence as from an aim for lower public debt yield. I instead said "under some circumstances", those circumstances being the intention to lower the interest rate on government debt, as the next sentence goes on to explain. I think what Richard Fisher is saying is that QE2 is done to make it easier for the American government to continue its fiscal deficit. While that certainly is a view which can be debated, it does use the same definition of "monetizing debt" as Daniel Thornton proposes.TheFreeloader (talk) 15:33, 8 January 2011 (UTC)

As the St. Louis Fed piece explains, the Fed is all the time buying government bonds from the secondary market with newly created money. While you may in principle call this "monetizing debt", that is a very unuseful description of what is happening, as what central bank is trying to do usually has nothing to do with particular debt it is buying, and everything to do with trying to expand the money supply. Government debt just happens to be the vehicle it uses.TheFreeloader (talk) 15:40, 8 January 2011 (UTC)

I take it you cannot think of an example. We must be able to find some common ground, I agree with you that the purpose in QE is not finance public spending by monetizing debt but to increase the money supply. Where I disagree is when you call it inflammatory and utterly meaningless, it is neither. I don't think the concept and definition of "monetizing debt" is such a hard one to get around; Daniel Thornton's research paper is really a proposal of how monetizing debt should/could be viewed and it does seem to have several different conflicting meanings in paper; the "narrow and uninteresting" one (standard definition), buying MBS by the argument that the MBS are worth money so this is also "monetizing debt" to the one where he looks at the intended purpose of the bank. These definitions conflict with each other so maybe he should have just thought of a new term instead of "monetizing debt" when looking at the banks purpose. But there are all the other references I provided which point to printing money to buy debt as "monetizing debt". The initial article did mention all these points and I see nothing wrong with putting them all in as was the case with my initial edit. --Caparn (talk) 16:28, 8 January 2011 (UTC)

I have already explained why I think the definition you are pushing is inflammatory. "Monetizing debt" evokes situations where the government uses its power to print money, to keep deficit spending going and it is then provoking to use that phrase about situations which have nothing to do with that. I also think the definition you are pushing is quite meaningless, as it lumps together wide different situations into the same category. I also would object to the notion that there is a "standard definition" for "monetizing debt", I don't think there is. Of the examples you cite, I have already talked about the 2nd, 3rd and 7th example. The first example is wikipedia itself, which naturally enough is no source to use for what to write on wikipedia. The 5th example is all about central banks increasing the money supply to keep government deficits going, not about the more broad definition you are pushing. The 4th and 6th example is actually the same example, as they are both, as far as I can tell, from the book Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. He is using the definition you are pushing, but I would hardly say that one person's view on what "monetizing debt" is, is enough to constitute a "standard definition" and as I already explained, I think there are good reasons not use this definition.TheFreeloader (talk) 17:06, 8 January 2011 (UTC)

TheFreeloader, You are not making sense:

1. Richard W. Fisher said "For the next eight months, the nation’s central bank will be monetizing the federal debt" and your response is: "I think what Richard Fisher is saying is that QE2 is done to make it easier for the American government to continue its fiscal deficit. While that certainly is a view which can be debated, it does use the same definition of "monetizing debt" as Daniel Thornton proposes". Which definition of "monetizing debt" do you mean? The one where the "effective way to determine whether a central bank has monetized debt is to compare its performance relative to its stated objectives."? In which case you are saying that the Fed's motivation is to finance its debt! What Richard Fisher says actually supports my argument that buying government debt with newly created money is in-effect monetizing debt (i.e. not taking into account the bank's motivation).
2. It's only inflammatory if taken out of context and the full context was given in the original paragraph. --Caparn (talk) 17:52, 8 January 2011 (UTC)

To get some common ground instead of: "However, buying government bonds from the secondary market can also in-effect under some circumstances monetize government debt." changed to be: "However, many analysts would call this two-step process, selling bonds and then buying them back with newly created money, "monetizing the debt"."? This could then be referenced to Daniel Thornton's article which says the same thing. --Caparn (talk) 18:38, 8 January 2011 (UTC)

Well, I guess that that could work, if you absolutely do have to have that definition in the article. I still don't see what it accomplishes to have it in there, as it lumps together widely different situations in one category. I'm gonna add your version in.TheFreeloader (talk) 18:50, 8 January 2011 (UTC)

Having it in the article gives people information about similarities between QE and printing money. You could ask the same question why it's included in the article by Daniel L. Thornton - Monetizing the Debt and the BBC's Stephanie Flanders: article Is quantitative easing really just printing money --Caparn (talk) 23:06, 8 January 2011 (UTC)

Edit request from Ikasam, 5 January 2011

Done
The year in the date in reference 25 of the article "Quantitative easing" is obviously incorrect, stating November 2011 (!) I assume it should be 2010. Ikasam (talk) 09:59, 5 January 2011 (UTC)

Done! Thanks for noticing this mistake. LK (talk) 10:55, 5 January 2011 (UTC)

"Forbidden by law" inadequate referencing

The main article contains the following sentence: "Central banks in some developed nations (e.g. UK, USA, Japan and EU) are forbidden by law to buy government debt directly from the government and must instead buy it from the secondary market." The reference given only applies to the US and even then does not actually say which law in particular. Its merely an article which says "The Fed is forbidden by law to purchase government securities directly from the government." I have a pet interest in this area and would dearly love to see some better referencing here. Reissgo (talk) 16:42, 23 February 2011 (UTC)

I've added a reference to http://www.bbc.co.uk/blogs/thereporters/stephanieflanders/2009/02/ where it states:

“ To preserve this distinction, the Bank of Japan was legally forbidden to buy debt directly from the Ministry of Finance when they undertook QE in the 1990s.

Funnily enough, the Bank of England faces the same legal constraint: Article 101 of the Maastricht Treaty (of all things) forbids direct central bank financing of deficits.

”

--Caparn (talk) 15:34, 24 February 2011 (UTC)

Good reference for the EU. This means its out of the hands of individual member country governments. I'd still like to know what particular law applies in the states. If its just a national thing then presumably they could simply change that law and hey presto - problem solved. Reissgo (talk) 17:38, 24 February 2011 (UTC)

It will be just a national law in the US and the laws could be changed, but there is no need as the Fed is allowed to buy government debt from the private banks. The government selling bonds to the banks and then the Fed printing money to buy them back is really the same thing as printing money to directly finance government spend with an extra step added which also makes it profitable for the private banks. However, if it were known that the US could just print money to directly finance its own debt, confidence in the dollar would be lost and it might become as trustworthy as the Zimbabwe dollar. The Fed already owns more government debt than China purchased though QE and its monetary policies to control interest rates. I think it currently owns over 40% of all US government debt something that might eventually cause panic among some people holding dollars.--Caparn (talk) 22:39, 24 February 2011 (UTC)

"The government selling bonds to the banks and then the Fed printing money to buy them back is really the same thing as printing money to directly finance government" - I thought that if the government do the bonds route then they have a compulsion to repay money in the future whereas if they just print directly then there is no such compulsion. AFAIK it is just such a mechanism which has led Japan to have a government debt of 200% of GDP. Reissgo (talk) 08:24, 25 February 2011 (UTC)

It is the stated intention of the central banks that they will sell the bonds back to the market and destroy the money when the economy has recovered, so no money will have been created long term, but there is no law that says they have to.--Caparn (talk) 19:29, 25 February 2011 (UTC)

Chris Giles quote

I've removed the quote from Chris Giles, as it is taken completely out of context. Reading the article, it is obvious that he is in favour of QE, and does not criticize it, as the out of context quote makes it appear. Google "Is quantitative easing just a licence to print money? Chris Giles" in order to find the article. LK (talk) 04:05, 4 April 2011 (UTC)

The article by Chris Giles is neither in favour nor against QE, it's just an NPOV article on what QE is and he states that "quantitative easing does belong to the same family of policies as the actions of Robert Mugabe. The difference is its degree". For this reason I am reinstating the quote.--Caparn (talk) 20:40, 4 April 2011 (UTC)

The exerpt gives a completely mistaken impression about Chris Giles' view on QE. A comparison of the context of exerpt inserted with the context of the original makes this clear. I reproduce below, the quote, and the context it is taken from. LK (talk) 11:35, 6 April 2011 (UTC)

Inserted by Caparn after the sentence, "According to economist Robert McTeer, former president of the Federal Reserve Bank of Dallas, there is nothing wrong with printing money during a recession, and quantitative easing is different from traditional monetary policy 'only in its magnitude and pre-announcement of amount and timing'."

Chris Giles, the economics editor of the Financial Times, says "Quantitative easing does belong to the same family of policies as the actions of Robert Mugabe. The difference is its degree."

Context from FT article by Chris Giles:
[Article is written in a Q&A style]

Isn't this printing money, the policy that got Zimbabwe into such a mess?

No and yes. The term "printing money" is wrong and the banknote printing presses will not go into overdrive. Instead, the Bank will create new money at the stroke of a computer key. Only the Bank can do that, because everyone accepts its electronic money as a means of payment. It is, after all, what all of us see on our bank statements when they are in credit. But UK quantitative easing does belong to the same family of policies as the actions of Robert Mugabe. The difference is its degree. The Bank is determined to meet its 2 per cent inflation target.

How will the Bank know whether quantitative easing is working?

By adopting a tactic not seen for a generation - targeting the money supply in the economy. "The supply of money is not growing quickly enough," Mr King said. The inflation target will still be paramount but the MPC will monitor and aim to influence the growth of money and credit in the economy by buying assets, including a large number of government bonds. By creating money to make these purchases, it will direct money into the economy via the bank accounts of those selling the assets. If commercial banks respond to the rise in the level of deposits by raising levels of lending, that will also boost credit in the economy. And buying assets also raises their price, decreasing the yields of government bonds and private-sector assets, reducing borrowing costs across the economy.

I don't see what the problem is with saying that it belongs to the same family of policies as the actions of Robert Mugabe. The section is about the comparison with "Printing money" so it is a good place to put that it is in the same family. We must be able to put somewhere in this section that it is in the same family, just as Chris Giles did in his article.--Caparn (talk) 16:23, 10 April 2011 (UTC)

Printing money

I have just gone through all the references used to back the moniker 'printing money'. Except for this one, a blog post by a BBC economics editor, none of the several other articles refer to the term 'monetizing the debt'. It is hence synthesis to start a discussion on this page about what is or is not 'monetizing the debt'. I have removed that discussion from the article. Please keep it out until there are reliable sources discussing this issue in connection with QE. We shouldn't allow this article to become a WP:Coatrack discussion about issues that are only loosely related. LK (talk) 04:58, 10 January 2011 (UTC)

What about this one: http://research.stlouisfed.org/publications/es/10/ES1014.pdf the refernce of which was right by the sentence about monetizing debt?: "Many analysts call this twostep process “monetizing the debt""?

Stephanie Flanders is not "a" BBC economics editor she is "the" BBC economics editor

LK, can you read through the comments above before deleting anything. --Caparn (talk) 13:59, 10 January 2011 (UTC)

LK, I'd like to point out one example of your non-logical statements, you seem to have leapt from the statement I put in initially : "It is against the law in all the nations/states that have performed QE (USA, UK, Japan and EU) to print money to finance government debt" for which I put in references to sites that listed only those nations, to the statement how you rewrote it: "Central banks in most developed nations are forbidden by law to buy government debt directly from the government and must instead buy it from the secondary market". You leaped from a definite list of 4 nations/states (USA, UK, Japan and EU) which were referenced to come to the conclusion "most developed nations", this leap cannot be assumed from the facts. You would need more evidence like either that the USA, UK, Japan and EU make up "most developed nations" or that out of the X developed nations that exist in more than X/2 of them it is illegal to buy debt directly from the government. I'm not saying what you have said is incorrect, it may or may not be, but it is the type of illogical leap that shouldn't be taken. --Caparn (talk) 16:42, 10 January 2011 (UTC)

The paper you refer to discusses monetizing the debt, but it does not discuss quantitative easing. The policy is very clear on this. To include contested material, you must cite "reliable published sources that are both directly related to the topic of the article, and that directly support the material as presented", see the lead of WP:NOR. Unless notable reliable sources explicitly link both the stated topic of the article, and the topic disputed for inclusion, including that topic is not allowed. It is original synthesis to discuss an issue in an article if reliable sources have not discussed that issue in connection with the topic of the article in the same way. One blog entry does not qualify as 'reliable sources' for this. Otherwise, we would have people discussing the characteristics of fascist dictatorships in the article about the US Federal government. See also WP:ONEWAY and WP:COATRACK for what may be included in an article. LK (talk) 09:04, 11 January 2011 (UTC)

Obviously the following quotation from the article is about QE

Since March 2009 the Fed has increased its holding of MBS, federal agency debt, and long-term government securities by more than $1.5 trillion for the express purpose of helping the mortgage market and flattening the yield curve to mitigate the effects of the financial crisis. Andrewedwardjudd (talk) 01:37, 14 April 2011 (UTC)andrewedwardjudd

It is about QE, for example this sentence from the article "For example, the Fed has completed its purchase of $1.25 trillion in mortgage-backed securities (MBS) in an effort to support the sagging mortgage market. These purchases have increased the monetary base just as if the Fed had purchased an equivalent amount of government securities." http://research.stlouisfed.org/publications/es/10/ES1014.pdf --Caparn (talk) 09:43, 11 January 2011 (UTC)

Search the article for the words 'quantitative easing', they don't exist in the article. Therefore, this article is not about quantitative easing, to claim otherwise is original research. LK (talk) 10:14, 11 January 2011 (UTC)

The whole article is almost entirely about QE (the buying of government debt by the central bank) and about how to determine whether or not it is monetizing debt. Your reference is to blogs.forbes.com which I presume is some sort of blog, and you have told me that Stephanie Flanders the BBC economic editor is not valid.

Another ref that could be used: http://www.financemetrics.com/quantitative-easing/ --Caparn (talk) 14:12, 11 January 2011 (UTC)

Articles by the BBC economics editor Stephanie Flanders are valid sources for Wikipidea articles, see here WP:NEWSBLOG. --Caparn (talk) 13:42, 12 January 2011 (UTC)

I come to Wikipedia because I know that most of the articles are written in straight forward fashion. But this article seems to be more in step with the intended purpose of quantitative easing and that is to explain the simple notion of printing money in such a confusing manner as to disguise that it is indeed simply printing money. Furthermore, the opening is faulty in two regard: 1) it supposes that the central bank actually prints the money rather than simply making a notation in its ledgers and 2) it puts forth the unsubstantiated claim that the true intent indeed is an altruistic aim of stimulating the economy when it can also be simply used as a form of taxation to raise money to fund government activities or to increase exports or to monetize debt or to increase capital gains tax revenue, etc.. I would like to suggest the following opening:

"Quantitative easing (QE) is a monetary policy in which a country's central bank uses its currency powers to buy government bonds (or other assets) with either money it has printed or a simple notation of credit in its ledger. While the intentions of this scheme can be varied, the practical result is inflationary pressure due to the increase in money supply without a commensurate increase of produced goods and services." Dpky (talk) 05:32, 10 March 2011 (UTC)

Question

Why are just affirmative citings mentioned. this: According to economist Robert McTeer, there is nothing wrong with printing money during a recession, and quantitative easing is different from traditional monetary policy "only in its magnitude and pre-announcement of amount and timing".[49][50]

Why aren't the any citations which question "every try or action to print money?"

An example can be found here http://mises.org/daily/4851 but I surely can look up more critics about it.

FDominicus (talk) 10:12, 12 February 2011 (UTC)

Yes it does look a bit odd having the opinion of one person inserted there but Lawrencekhoo| (talk) seems to insist upon it. It would be more balanced if there were other views.--Caparn (talk) 15:40, 24 February 2011 (UTC)

Many people on Wiki seem to have learnt economics at school or university where there is a branch of economics called mainstream economics being taught. They seem unaware that in the real world people are far more open minded about different ideas such as credit theory of money, post keynsian, and people like schumptler and basil moore. So unless you provide quotes from their books it is difficult to get changes made here. These same supporters of the so called mainstream economics feel it is their duty to correct people holding erroneous ideas coming from fringe economists - even though most people can recognise that university textbooks are not a substitute for practices that are happening in the real world where real world difficulties and chaos cannot be modeled by theories based on what happened in the past. Economics is one of those disciplines that can model the past to predict the future while the future is like the past. Meanwhile financiers operating in the real world need practical solutions. — Preceding unsigned comment added by Andrewedwardjudd (talk • contribs) 05:39, 12 April 2011 (UTC)

Buying bonds to control interest rates

The text currently states: "Instead of lowering their interest rate target (and buying government bonds to achieve that target), the central bank buys a specified quantity of government bonds and other financial assets in order to increase the money supply and the excess reserves of the banking system." This is the way interest rates are controlled in the US, but not other countries. For example in the UK and Europe a monthly meeting is held where a committee just decide on the base interest rate and then the central bank pays that rate on overnight deposits. Either the wording needs to be changed to reflect this or it needs to be removed.--Caparn (talk) 11:48, 3 April 2011 (UTC)

You are incorrect. Changes to the rate paid on overnight deposits is largely indicative. Changes to this rate may reduce money supply, but they cannot be used to increase money supply. Central banks must buy government bonds in order to inject new base money into the economy (and to achieve a lower interbank interest rate). This readily confirmed by any macroeconomics reference book. Sources are readily found in the article on open market operations. LK (talk) 11:52, 31 March 2011 (UTC)

In the UK the LIBOR rate is the London Interbank Offered Rate and is the rate at which private banks lend to each other, this has nothing to do with the base interest rate which is just set at a monthly MPC meeting. There is no need for them to buy any bonds to change the base rate, they just change the amount of interest they pay on overnight deposits. Also, the Bank of England have an inflation rate target, currently 2%, and not an interest rate target. P--Caparn (talk) 14:23, 31 March 2011 (UTC)

The basic workings of economics, and the workings of monetary policy is the same everywhere. I suggest that you read a good textbook or take a class in economics. If you wish one from a European prespective, I would suggest Burda and Wyplosz, published by Oxford University Press. Look at Chapter 9 for a discussion of Monetary Policy in the European context. The article on open market operations also has a short discussion of monetary policy by the ECB. More to the point of our discussion, references for how monetary policy is carried out is readily available in that article and in the article on monetary policy. I'll import them here in due course. LK (talk) 02:16, 1 April 2011 (UTC)

I note that regardless of my explanation here, Caparn has decided to revert to his prefered version.[3] I have reverted this revert. I will explain in detail below:

• My clarification that, "Instead of lowering their interest rate target (and buying government bonds to achieve that target), the central bank buys a specified quantity of government bonds and other financial assets in order to increase the money supply", is as I have explained above, correct.

I have already stated above, the wording you have put in is US specific the UK and ECB don't have an "interest rate target".--Caparn (talk) 10:45, 1 April 2011 (UTC)

Caparn the BOE interest rate target is called the Base rate. The ECB interest rate target seems to go by different names but is for example the Euro policy rate. The target rate is the rate that is aimed for in the actual money market that exists in either Sterling or Euro. The american rate is the nominal Federal Funds rate where the FFR is the actual market rate between banks for overnight lending Andrewedwardjudd (talk) 18:12, 11 April 2011 (UTC)andrewedwardjudd

Please provide a reference to and "target interest rate" and QE for UK QE for this to be accepted.--Caparn (talk) 11:50, 3 April 2011 (UTC)

• Caparn's revert to "These purchases have increased the monetary base just as if they had purchased an equivalent amount of government securities" is not neutrally stated. My statement that "These purchases increased the monetary base in a way similar to a purchase of government securities" states the same in a neutral fashion.

"These purchases have increased the monetary base just as if they had purchased an equivalent amount of government securities" is the exact wording in the reference provided, you have changed the meaning of the referenced document.--Caparn (talk) 10:45, 1 April 2011 (UTC)

• Similarly, "However, this two-step process, where the government sells bonds to private entities then the central bank buys them back with newly created money, is called "monetizing the debt" by many analysts." is incoherent. I replaced with, "However, this two-step process (where the central bank buys government bonds from private entites who have bought it from the government), can also monetize the debt."

Again the reference provided states "is called "monetizing the debt" by many analysts." Again you have changed the meaning of referenced text. Could you also explain what you thought was incoherent about it?--Caparn (talk) 10:45, 1 April 2011 (UTC)

Also, to illustrate the two-steps it needs to be worded in a way the two-steps can clearly be seen, e.g. Step 1 The government sells bonds to private entities, Step 2 The central bank buys the bonds from the private entities with newly created money. The way you have worded it it is not clear what the two-steps are. --Caparn (talk) 19:41, 3 April 2011 (UTC)

• The website, STIMULUS.ORG, fails the guideline on external links (see WP:ELNO #13), as it is not directly relevant to the policy of quatitative easing as pursued by central banks around the world.

I do not believe is does break any of the points listed in the WP:ELNO especially #13 as the link contains the current Federal Reserve Balance Sheet which is directly relevant to the QE article.--Caparn (talk) 10:45, 1 April 2011 (UTC)

LK (talk) 05:55, 1 April 2011 (UTC)

Point 1, you are wrong, and the ref's prove it. Points 2&3, if articles referenced use non-neutral langauge that does not mean that the same non-neutral language can be used in Wikipedia. See WP:NPV where it says, "Try not to quote directly from participants engaged in a heated dispute; instead, summarize and present the arguments in an impartial tone." Last point, STIMULUS.ORG clearly fails WP:ELNO, your refusal to see that is just a testament to your bias and desire to push a certain viewpoint. Please read the guidleline on WP:COI and WP:SPAs. --LK (talk) 11:31, 1 April 2011 (UTC)

I think Caparn is right on the third point, it's only an opinion that quantitative easing is "monetizing the debt". It should not be presented as a fact. It clearly is a debatable opinion, and the very article which is used as source for that statement was written to argue against that opinion.TheFreeloader (talk) 16:47, 1 April 2011 (UTC)

On point 2 I will accept your change of text if you can provide a theoretical or real case where the "increase in monetary base" would not be the same if they had purchased an equivalent amount of government securities. --Caparn (talk) 11:55, 3 April 2011 (UTC)

STIMULUS.ORG was included as it contains a chart to the Federal Reserve Balance Sheet, I've found another link to Federal Reserve Bank of Cleveland that has an even better chart so I included this link instead: http://www.clevelandfed.org/research/data/credit_easing/index.cfm. --Caparn (talk) 13:36, 3 April 2011 (UTC)

I just looked up QE on Wikipedia again in the hope of finding an explanation. Frankly the article is currently cr*p and no help. The discussion was far better in explaining things even though it is an argument. Rather than each pulling each others work to pieces is there not any way that we could have a number of QE articles that might be in disagreement but at least might be coherent. Once there are a few complete articles then one might have something to disagree on.

Finally I really would not quote the BBCs explanation of anything like this. Even half the economists seem incapable of using words in a consistent way. Some even seem to take pleasure in coming up with the silliest terms like "haircut" which serve to truly obvuscate what is actually going on. Tom de Havas —Preceding unsigned comment added by 81.141.83.147 (talk) 03:01, 4 April 2011 (UTC)

Creating Money

The following text is in the first paragraph "The central bank creates money by buying government bonds and other financial assets in order to increase money supply and the excess reserves of the banking system." The central bank does not create money by buying debt as it could use money that is already in circulation to buy the debt; which wouldn't be creating money. It creates money by "creating money", which it uses to buy the debt with, this needs to be made clear. --Caparn (talk) 11:25, 4 April 2011 (UTC)

As the references I've quoted have made clear, the initial step where the Central Bank first 'creates money electronically by crediting it's own account' is completely redundant and only happens in the UK. In the US for instance, the FED just buys bonds from the open market and then credits the accounts of banks that it has bought the bonds from. This buying of financial assets by the FED is what creates money.

Perhaps a bit of Macro 101 will make this clear. Suppose the Central Bank prints $1 billion in new notes. This action has no effect on money supply, as long as the notes remain in the Central Bank's hands. Printing money does not increase money supply. However, when the Central Bank buys bonds from the open market, this injects money into the economy regardless of whether the Central Bank is paying for the bonds using new notes, old notes, or electronic balances. The Central Banks' action of buying financial assets is what increases money supply. All economists agree on this basic issue. I suggest refering to any macro textbook. LK (talk) 11:45, 6 April 2011 (UTC)

This is semantics, it needs to be made clear to normal wikipedia users that the money is created. As it is written it looks like it could be purchased with old money that has already been in circulation. Your argument about it not having any effect is true of any money, even if you to just stuff your money it inside your mattress, and the negligible amount of time it is created before it's spent makes this argument insignificant anyway. —Preceding unsigned comment added by --Caparn (talk) 15:13, 6 April 2011 (UTC)

I think it is fairly clear the way the lead is currently worded that money creation is a part of the quantitative easing process. I can not see how people would interpret a sentence which starts with: "The central bank creates money...", to mean that central bank does not create money.TheFreeloader (talk) 20:41, 6 April 2011 (UTC)

This "creation" could be confused with "increasing the money supply" because it actually begins with: "The central bank creates money by buying government bonds and other financial assets" so it could be confused with increasing the money supply by using money that was previously in circulation rather than newly created money. The Bank of England reference refers to creating money then buying bonds with the newly created money. If you can find a reference that says the equivalent of "The central bank creates money by buying government bonds and other financial assets" you can keep it else it goes back to the description given by the Bank of England where creation of money is explicitly referenced.

References: http://www.bankofengland.co.uk/monetarypolicy/pdf/qe-pamphlet.pdf "The Bank creates new money to buy assets from private sector institutions"

You should watch this video http://www.bankofengland.co.uk/education/inflation/qe/video.htm "The Bank of England's Monetary Policy Committee has been purchasing assets financed by new money that the bank creates electronically" This description is clear and to the point and understandable by most wikipedia users. --Caparn (talk) 22:33, 8 April 2011 (UTC)

An example of the Central Bank not creating money by spending money would be when the Central Bank pays its staff's salaries. It does not pay its staff with newly created money but money that has already been in circulation so it does not "create money" by paying its staff.--Caparn (talk) 16:18, 10 April 2011 (UTC)

FOMC member James bullard is also on a video series at the st louis fed explaining QE where he describes it as 'money printing if you like'

And clearly if new and old government securities pass quickly to the central bank via QE to enormously increase the balance sheet then until they sell those bonds they are monetizing both new and existing debt. This is not news to anybody and it is what the central banks want you to know because there intention is to create inflation. Andrewedwardjudd (talk) 18:12, 11 April 2011 (UTC)andrewedwardjudd

Edit warring

"with new money it has created electronically by simply increasing the computer record a bank holds at the central bank[2]"

[2] is http://www.telegraph.co.uk/finance/comment/liamhalligan/8484530/Americas-reckless-money-printing-could-put-the-world-back-into-crisis.html , but I could not find where the claim "increasing the computer record a bank holds at the central bank" is mentioned there (is it even correct in the QE context for the UK and USA?). Also, please add context quotes to such citations to help verifiers. -84user (talk) 06:40, 17 June 2011 (UTC)

I already provided a reference yesterday to the talk page from the BOE. It achieved nothing so it seemed appropriate to attempt a bold compromise change. The BOE QE pages are already referenced on the main page.

From the BOE: http://www.bankofengland.co.uk/publications/quarterlybulletin/qb090201.pdf The Bank of England is the sole supplier of central bank money in sterling. As well as banknotes, central bank money takes the form of reserve balances held by banks at the Bank of England. These balances are used to make payments between different banks. The Bank can create new money electronically by increasing the balance on a reserve account. So when the Bank purchases an asset from a bank, for example, it simply credits that bank’s reserve account with the additional funds. This generates an expansion in the supply of central bank money. Andrewedwardjudd (talk) 06:51, 17 June 2011 (UTC)andrewedwardjudd

AEJ, I like your new language in the lead. Just one prose thing: "purchasing financial assets... by simply increasing the computer record a bank holds at the central bank" isn't "essentially the same" as OMO... it is OMO, albeit on a larger scale and applied to more asset classes. Let me propose the following sentence instead: A central bank implements quantitative easing by purchasing, through open market operations, financial assets from banks and other private sector institutions with new money it has created electronically. This is more concise and requires only reference to the BOE pamphlet; in particular, the reference to the Halligan column can be removed, addressing the concerns of 84user and others, including me. (The BOE pamphlet never uses the phrase "open market operations". If people are cranky about that we can also cite a reference that does.) What do people think? Lagrange613 (talk) 07:09, 17 June 2011 (UTC)

I do not like the use of OMO. If the use of OMO is unusual it should not be in the lead. Personally i find it peculiar that it is so strongly being emphasised. The feds could for example begin buying property to support house prices. Would that be an OMO? And given the enormous amount of literature about from the feds themselves in some cases and analysts that describe money printing i dont see why we have to avoid such simple useage by saying it unclearly by saying it is created electronically. Essentially there is no method of creating the money. It comes from absolutely nowhere. Andrewedwardjudd (talk) 07:30, 17 June 2011 (UTC)andrewedwardjudd

Would you please explain your specific objection to the wording I proposed? Lagrange613 (talk) 07:37, 17 June 2011 (UTC)

1. I do not think certain asset purchases can be properly described as OMO purchase. Nor do i think the method is OMO when for example the BOE have emphasised they will be buying from the wider public rather than only the usual institutions with reserve accounts.

2. Money created electronically does not clearly say this money came from absolutely no place on earth and has simply been provided from nothing to ensure the money is injected into the existing money supply. For what reason must the expression be sanitized so that clarity is lost?

3. If there are almost no reliable sources saying QE is 'via a process called OMO' then it should not be in the lead. Andrewedwardjudd (talk) 08:03, 17 June 2011 (UTC)andrewedwardjudd

I'm happy to omit mention of OMO from this sentence, especially since they're mentioned with ample citations in the second paragraph. (Your language mentioned OMO, so I thought this might be important to you.) I've made the prose a bit smoother and cleaned out the unused refs. I'm not getting sucked back into the "out of nothing" conversation. Other editors and I have duly explained the policy issues there. Lagrange613 (talk) 08:21, 17 June 2011 (UTC)

Your version might be true in America but it is not true in the UK. Many sellers will not have UK central bank reserve accounts. And i note you said you liked my text but you changed it anyway to the sanitized version that apparently is the only allowable version on wiki.Andrewedwardjudd (talk) 08:38, 17 June 2011 (UTC)andrewedwardjudd

Thanks for explaining the US/UK difference; I've changed the text accordingly. Do you see how easy and productive these conversations can be if they're approached as cordial exchanges of information and viewpoints rather than battlegrounds? Lagrange613 (talk) 08:51, 17 June 2011 (UTC)

So far you have accused me of being politically motivated and being deceptive by editing an early comment to hide, you claim, what i wrote earlier and you have repeatedly asked me to provide citations on a comment that already is sourced to the BOE 2005 winter quarterly bulletin, and asked me to provide a source that is already in that article, or a source that is common knowledge for anybody familiar with modern central banking practices.

Since your user name was apparently created last week, it seemed you were naive about wiki, and were not prepared to show good faith towards me in your enthusiasm to create changes here, where your comments about money creation suggested you were not familiar with the practice and felt there was a need for it to be written very differently. Already you have linked me deliberately to edit warring in this very section. Dispite all of these things i patently did my best to steer the conversation to a more productive conclusion.

Life can of course be very easy or very hard. Andrewedwardjudd (talk) 10:28, 17 June 2011 (UTC)andrewedwardjudd

narrow corridor interest rate target method

This involves a specific target. It does not involve a target range as my text is forced to exist as due to the activities of LK and BigK.

The BOE still fine tunes the target via OMO but OMO is no longer the principal method of achieving the target. Previously the cash rate would spike very irratically.

Editors changing my text to say it is now a target range are simply inventing things.

07:04, 17 June 2011 (UTC)andrewedwardjudd — Preceding unsigned comment added by Andrewedwardjudd (talk • contribs)

I've tried to clarify it, without losing the accuracy. BigK HeX (talk) 07:27, 17 June 2011 (UTC)

The rates on the facilities are not targets they are fixed interest rates. The target is the aimed for rate for the cash rate, and the fixed rate for some other operations like intraday liquidity for the payments systems. It should read something like 'In recent years the central banks have adopted a corridor system to help manage their policy interest rate target' to help balance the out of date text in the text books just quoted. Andrewedwardjudd (talk) 07:46, 17 June 2011 (UTC)andrewedwardjudd

I'm having a little trouble understanding why you want to include such detailed information on rate corridors here. Information like this may belong somewhere on Wikipedia, but maybe not right where you've put it. Going into too much detail about targets vs. corridors shifts the focus away from the comparison between QE and standard monetary policy, which is the purpose of the section. On your talk page, LK suggested Monetary policy as a better home for this information. Wherever it ends up, it needs to include inline citations; at the moment it's presented completely unsourced, which opens it up to accusations of WP:OR. Lagrange613 (talk) 07:30, 17 June 2011 (UTC)

Somebody went to the trouble of adding details about 'the process' that mentioned interest rate targets. But what is described is describing an old practice that is now superceded in many cases by the corridor system.

If you think it is important we compare QE to usual operations then it seems proper to properly describe usual operations. In reading wiki i noticed it was incorrect so changed it.

Unsourced??? it is a quotation from the 2005? winter boe quarterly bulletin. Andrewedwardjudd (talk) 07:46, 17 June 2011 (UTC)andrewedwardjudd

Please provide an inline citation to the quarterly bulletin. Also please place the quotation in quotation marks rather than italicizing it. Does the quarterly bulletin support the statements that most banks in the industrialized world use corridors and that the goal is reducing volatility? If not, each of these needs an inline citation to a reliable source. Lagrange613 (talk) 07:55, 17 June 2011 (UTC)

You joined wiki apparently a few weeks ago. On wiki an editor is not required to provide particular kinds of citations for everything he says. The text clearly says "the BOE announced in its 2005 winter quarterly bulletin" If you want to put the BOE text in quotes then please do so. The idea here is to cooperate together rather than force users to make changes that you can make yourselfAndrewedwardjudd (talk) 08:09, 17 June 2011 (UTC)andrewedwardjudd

Take another look: I've been on Wikipedia for years. The length of my tenure or anyone else's does not affect the requirement that all content be verifiable. Unless you want to argue that WP:BLUE applies here you're going to have to find some sources and cite them. As the adding editor, you have the burden of doing this. Lagrange613 (talk) 08:41, 17 June 2011 (UTC)

Major goals of QE

A major goal of QE cannot be to increase the excess reserves of the banking system when the banking system already had a huge number of excess reserves. Such an idea is based in monetary ideas that are no longer supported by central bankers. The central banks already supply all the reserves the banking system wants and they cannot possibly require more than the almost two trillion they already have.

The primary aim according to Bernanke is to lower the yield curve. Andrewedwardjudd (talk) 10:47, 17 June 2011 (UTC)andrewedwardjudd

"Unconventional"

I didn't even read the entire section but noticed on the very first line that expresses Quantitative Easing as being "Unconventional". Maybe an economics professor will correct me, but I believe changing interest rates and buying or selling debt are the primary policies available and used by the Fed. So the wording "Unconventional" should be removed. — Preceding unsigned comment added by AnotherFinanceGuy (talk • contribs) 20:29, 9 March 2011 (UTC)

QE is generally known as an unconventional monetary policy. Just try to google for "unconventional monetary policy" "quantitative easing" and check some of the results. This link describes the difference quite well: http://www.ecb.int/press/key/date/2009/html/sp090428.en.html --Caparn (talk) 20:15, 10 March 2011 (UTC)

There is a problem with the text because it is describing unconventional monetary policy when conventional monetary policy is very similar. Obviously if a central bank has an almost zero interest rate target and there is little inflation and there are 1.25T of agency mbs and agency debt 'permanently' purchased, they are doing QE, but we do not know if they are monetizing the debt permanently as proven by the future, but they might be and it should be in the text. Andrewedwardjudd (talk) 05:54, 12 April 2011 (UTC)andrewedwardjudd

Andrewedwardjudd, please do not materially change your own comments as you did here, per WP:REDACT. If you decline to revert your deletion of the two paragraphs above, I will repost them below. Lagrange613 (talk) 20:09, 16 June 2011 (UTC)

Andrewedwardjudd has declined to revert his deletion, so for completeness I'm posting his comment below as it originally appeared, except for indentation and timestamp. These appeared originally under Andrewedwardjudd's timestamp above.

There is a problem with the text because it is describing unconventional monetary policy when conventional monetary policy is very similar to what is described in the first paragraphs. The main difference with QE is that the Conventially monetary policy does so called permanent purchases which may be or may not be sold later, rather than time limited purchases with have to be bought back again. Conventionally the central banks are continually creating new money as it is demanded by the commercial banks because they target interest rates. Therefore if you doubt the central bank will ever sell the permanent purchases then you can say they are monetizing debt. Obviously if a central bank has an almost zero interest rate target and there is little inflation and there are 1.25T of agency mbs and agency debt permanently purchased they are doing QE but we do not know if they are monetizing the debt permanently but they might be and it should be in the text simply because it is common sense.

Wiki is odd however. If you go to wiki money creation there are entire blocks of text with no citations whatsoever. What would happen if you made a cited change however which was not in university text books?

Lagrange613 (talk) 07:09, 19 June 2011 (UTC)

I can see now my text makes total sense if "conventially monetary policy" is changed to "unconventional monetary policy". Andrewedwardjudd (talk) 11:53, 19 June 2011 (UTC)andrewedwardjudd

Ex-Nihilo

I've just received a very patronising "welcome to Wikipedia" message on my talk page by a user calling him/herself User:Lawrencekhoo. Amazingly this user claims to have a degree in economics. I find that hard to believe as the creation of Money for QE "Ex-Nihilo" ( out of nothing ) is neither Original Research or POV, as User:Lawrencekhoo claimed in his patronising message on my talk page. Does User:Lawrencekhoo think that money is dug up out of the ground or something?

The wording I restored to the article, which User:Lawrencekhoo has now reverted was discussed at length in this talk page and was formed by consensus and is also sourced.

Restoring the information. Vexorg (talk) 20:14, 8 June 2011 (UTC)

I've just worded the info more accurately. Vexorg (talk) 20:32, 8 June 2011 (UTC)

Refering to your edit,[4] first, consensus is against it not for it, and second it is POV wording not properly sourced, the words 'ex-nihilo' appear nowhere in the source cited. LK (talk) 06:36, 9 June 2011 (UTC)

Also, please don't reintroduce contentious material, note that the burden of proof is always on the editor who wants to include material, to show that the material is appropriate. (See WP:BURDEN) LK (talk) 06:40, 9 June 2011 (UTC)

Please stop edit warring. I've shown the material is appropriate by adding a second source regarding the creation of money out of nothing. Can I also advise you do some research into the way money is created. Vexorg (talk) 20:36, 9 June 2011 (UTC)

For information... here's the added Reliable source for the fact that Money is created out of nothing at the start of the Quantitative easing process. http://news.bbc.co.uk/1/hi/programmes/the_daily_politics/7925669.stm Vexorg (talk) 23:15, 9 June 2011 (UTC)

For information, I've asked the editor LK (talk to tell us all where the money comes from if it doesn't appear of of nothing. This article is currently incomplete as a reader is not told where the QE money comes from. LK (talk claims 'out of nothing' is POV. This is impossible as it's a fact. Vexorg (talk) 05:31, 14 June 2011 (UTC)

It looks like LK (talk) cannot explain to us how money is created. instead of explaining he deleted my request from his talk page with the retort |'Talk to the Hand' - This isn't the sign of an editor interested in the quality of Wikipedia but rather editing to a personal agenda Vexorg (talk) 06:35, 14 June 2011 (UTC)

Properly sourced information explaining that the money is created "out of nothing" has been restored. Would editors please note that they should not remove information from articles which is properly and reliable sourced. Please see WP:VERIFY and WP:SOURCE if you are an editor in doubt about the policy. Vexorg (talk) 17:12, 14 June 2011 (UTC)

I have encountered similar problems with user LK. Wiki is pretty useless on financial issues and unfortunately there is no chance of this changing because there is an endless number of editors to come forwards to ensure you fail. On QE The federal reserves James Bullard talks about money printing and Governor King of the BOE talks about created electronically. But to reflect these realities you will need to have more editors than the friends of LK.

and forget about an appeal process at Wiki that can help you. It is rigged against you. Andrewedwardjudd (talk) 10:45, 15 June 2011 (UTC)andrewedwardjudd

Perhaps some participation by an editor who has so far been an outsider can help here. First, as to behavior: It seems Vexorg boldly edited the lead and was reverted by LK. The next step should have been to discuss on this talk page, but instead LK improperly templated Vexorg's talk page. Vexorg should have responded by opening a discussion here, but instead he re-reverted; per WP:BRD#Edit warring, this constitutes edit warring. By my count, other participants in the edit war include Bobrayner, Darx9url (twice), and Andrewedwardjudd, none of whom has contributed to this talk page in a way that might promote a resolution. LK's participation here could have been more helpful.

Second, as to content: Vexorg, your boldness is good, but as LK said, you shouldn't have removed the BOE reference. BOE is reliable, probably more reliable than the BBC on these matters, and you yourself said editors "should not remove information from articles which is properly and reliabl[y] sourced." Furthermore, the lead as it stood before your edit reflected consensus. Consensus here does not just mean LK's opinion, as Bobrayner's and Darx9url's edits have shown.

So how should we resolve the conflict? As I see it, there are two components to Vexorg's edit: the list of asset classes and the characterization of open market operations as creating money ex nihilo. I don't like the list, for two reasons: it doesn't appear in the source, and its appearance in the lead suggests that QE means buying all the items on the list and only those. I'm not sure what the ex nihilo characterization adds given that the original text began, "The central bank creates money". Details about open market operations probably belong in the open market operations article rather than here, but if you'd like to argue why this detail (that expansionary OMO have been characterized as creating money ex nihilo) above others deserves inclusion here I'm all ears. Lagrange613 (talk) 20:22, 15 June 2011 (UTC)

Hi, (talk) - I didn't remove the BOE reference. At least not intentionally. As far as I can see my last edit includes the BBC reference AND the BOE reference. Vexorg (talk) 21:20, 15 June 2011 (UTC)

"Furthermore, the lead as it stood before your edit reflected consensus.!" - well if you go further back in this discussion page there was a big discussion over the inclusion of the fact that the money is "created out of nothing" and this information ended up being part of the article. I returned to the article more recently and saw this information, which was and is properly sourced. IMO it's simple... The facts are this: The money is created 'Out of nothing'. In fact the very foundation of the QE process is creating money 'out of nothing' Not only is this fact it is verifiable by reliable sources. The phrase "Ex-Nihilo" was not my original insertion. I found it jargon and included "Out of Nothing" for those layman readers.

It is in my opinion that a Wikipedia article should include detail but also be simple for laymen to understand. Surely no one is arguing that we should keep the fact that the money is created 'out of nothing' from the reader? I can't see any political agenda to do so, so I remain a bit baffled as to why editors are passionate about preventing this information from being in the article. Vexorg (talk) 21:20, 15 June 2011 (UTC)

Vexborg the private banks are stuffed full of money that was created from nowhere. So naturally people are passionate about ensuring it is not common knowledge that this has happened and may continue to happen. QE we are told involves nothing unusual. Please align yourself with the consensus for your own well being. Resistance is futile in my experience on these matters. Andrewedwardjudd (talk) 21:45, 15 June 2011 (UTC)andrewedewardjudd

'Vexborg' - ha! .... like it :) - I don't see why people should be concerned about hiding this fact. The money isn't tied to any physical commodity like gold any more and money has to be created from nothing to cater for demand. I have no problem with money being created from nothing. If there' anything immoral about it it's charging interest on the creation of money from nothing and worse allowing private banks to do this. But that's a different issue really. Vexorg (talk) 22:49, 15 June 2011 (UTC)

You replaced the BOE citation attached to the excerpt at issue with the BBC citation. I see the BOE is cited at the end of the paragraph, as well. I see some discussion about whether to include "creating money", but not creating it "out of nothing". So your edit did reflect a change vs. consensus. There's nothing wrong with that in itself; the problem is with deleting a reference to a RS. Again, you yourself highlighted the problems with that.

I just don't see what suggesting OMO create money "out of nothing" contributes to the original language. A reader familiar with OMO probably would have seen this characterization before; for a reader unfamiliar with OMO, adding to the assertion that the bank "creates money" that it is created "out of nothing" wouldn't enhance understanding. The best solution for such a reader is to link the OMO article and not attempt too detailed an explanation of OMO in this article, or at least not in the lead. The reverting editors cited POV; they may have thought that the "out of nothing" language suggests that the operation is illegitimate and advances a political agenda like AEJ's.

Can we agree to revert the list of asset classes while we discuss ex nihilo? Lagrange613 (talk) 22:19, 15 June 2011 (UTC)

Ah, I see, the previous ex nihilo discussion is in the archive. Looks like there's been a lot of controversy about it. In this case I think the objections outweigh the concerns for more completely characterizing OMO, especially since the OMO article is linked right there. Lagrange613 (talk) 22:28, 15 June 2011 (UTC)

to asnwer a few points of Lagrange613 ....

1] For a reader unfamiliar with QE ( and OMO ), stating early on that the money is created out of nothing is both factual and simple and would enhance the reader's learning process by giving them the foundation fo the process. They can then go on to learn about Fractional Reserve and deposit multiplication as well, by following the links to OMO, etc,etc from this article

2] There was a previous discussion about Ex-Nihilo and 'out of Nothing' as I was involved in it.

3] Editors citing 'Out of Nothing' as POV have IMO no knowledge of how it works. Or they have a political agenda. I prefer the benefit of the doubt and would guess the former. There's no suggestion that using the term 'Out of nothing' means an illegitimate operation and frankly how else are we going to describe it and leave the reader understanding that money is actually created out of nothing? Vexorg (talk) 22:41, 15 June 2011 (UTC)

4] I don't have a problem with the list of asset classes and I'm happy if anyone wants to improve upon that. My beef is with the seemingly obsession with removing the core foundation of the QE process from the article, the 'Out of Nothing' Vexorg (talk) 22:41, 15 June 2011 (UTC)

I reverted the list; thanks. On ex nihilo, two things:

1. If OMO create money ex nihilo for QE, then they always do. If the ex nihilo characterization is the "core foundation" for anything, it's for OMO. The purpose of this article is to provide information on QE, not OMO. The lead especially is not the place for it.
2. You say it's not POV and express shock that others would think so, but a lot of them seem to. Would a reader seeing "ex nihilo" (when there's already a reference to money creation and a link to OMO) really add so much that it outweighs the risk of violating a core content policy? Conversely, do you think erring on the side of caution with respect to POV is really going to prevent someone from understanding QE?

Lagrange613 (talk) 00:27, 16 June 2011 (UTC)

Another reason to like the old language: It focuses on the effect rather than the process of OMO. OMO is a means to achieve the goals of QE (namely, to increase the money supply and the banking system's excess reserves) so this is more appropriate here. Lagrange613 (talk) 00:34, 16 June 2011 (UTC)

Deposit Multiplication under Fractional Reserve banking creates money 'out of nothing' as well'. There's nothing wrong in stating that in the lead of all three articles. I've also restored the ("out of Nothing") in this lead as there's nothing wrong in succinctly explaining a term in brackets. Most people don't know what Ex-Nihilo means and it's not good practice or polite to divert someone to another article just to look up a term. There's certainly no violation of 'Core content policies' here. Vexorg (talk) 01:47, 16 June 2011 (UTC)

I disagree with your reversion of the parenthetical definition and with your assumption that most people don't know what ex nihilo means, but I'm not particularly interested in fighting it. For reference, on Wikipedia we often link an article for more information on a topic; it's not a question of politeness but of good encyclopedic writing.

If the article is POV then that does violate a core content policy (namely WP:NPOV), and POV is the question here. Clearly we need some other perspectives to reach consensus, so I will be inviting editors involved in past discussions of this issue to join. Lagrange613 (talk) 02:26, 16 June 2011 (UTC)

There's no POV about the fact that money is created Out of Nothing. It is a fact that anyone with even a small amount of monetary and economic knowledge will be aware of. Regarding how many people know what "Ex-nihilo" means then I simply ask you to walk through any town centre and ask random people if they a] know what ex nihilo means and b] if they know what Out Of Nothing means. You will struggle to convince anyone that Ex-Nihilo is a commonly known phrase. I would also ask why you are so passionate about not including the phrase 'Out Of Nothing' - Three words is nowhere near bloating content and it's a violation of good encyclopaedic writing to send a reader of to another article when a phrase can be explained with three words. Linking to an article for more information of a topic, such as Open Market Operations is a different matter to a quick explanation of a phrase.

I would be careful of inviting editors to join a discussion as that can be seen as canvassing and I've seen heavy penalties given out to editors who indulge in this practise. Vexorg (talk) 02:56, 16 June 2011 (UTC)

Let me explain my opposition to the parenthetical definition better. If everybody knows what ex nihilo means, then it's fine by itself, maybe with a link. If it's above people's reading level, we shouldn't say it at all; it should just be "out of nothing". Doing both seems pretentious ("expressive of affected stature"). Lagrange613 (talk) 02:47, 16 June 2011 (UTC)

I don't see the inclusion of both pretentious at all. It succinctly explains the Latin jargon to a layman reader without interrupting the flow of the article. My interest is in making Wikipedia easy to use and understand for people with a wide range of levels of education. If you really are passionately against having both phrases in the article, and frankly this is a minutiae causing far too much time for it's worth, then remove Ex-Nihilo and leave 'Out Of Nothing' ( without brackets ). The verifiable source says 'Out Of Nothing', it's not POV so core content policy isn't violated in anyway. Vexorg (talk) 03:02, 16 June 2011 (UTC)

'Ex-Nihilo' is obviously a fringe libertarian POV that's being pushed. That's why I haven't bothered to engage on the talk page. As far as I'm concerned Vexorg is being a disruptive editor who's wasting everyone's time. My position is:

• Descriptions by the central banks, BOJ, BOE and Fed are the most reliable sources here. They should be given due weight.
• The lead should reflect what's in the article. 'Ex-Nihilo' does not appear in the article it should not be in the lead.
• 'Ex-Nihilo' is OR as no source uses that word. It is also not neutral wording.

Vexorg's actions are obviously being taken to push a Libertarian POV. As such it breaks our WP:COI guideline. LK (talk) 04:46, 16 June 2011 (UTC)

What on earth are you talking about with your "fringe libertarian" nonsense? by introducing such political accusations you are exposing your own political bias. The creation of Money "out of nothing" is reliably and properly sourced. It is also factual. You are clearly edit warring and removing properly sourced material with a now proven political bias . I have already sought administrator advice about your edit warring and will take this further. You have NO GROUNDS for removing properly sourced material from this article and sending innappropriate and offensive templates to experienced editors really discredits your ability to be of value to this article. Vexorg (talk) 04:53, 16 June 2011 (UTC)

You are also furthering the proof of your offensiveness by accusing well meaning editors of being disruptive. The fact you have to accuse other editors of being disruptive simply because they don't not agree with your agenda is disingenuous. But please carry one as it exposes you. Vexorg (talk) 04:57, 16 June 2011 (UTC)

Also note that LK (talk) is continuing to remove properly sourced information from the article. Vexorg (talk) 04:59, 16 June 2011 (UTC)

The money creation process is described in every single macroeconomics textbook. Kindly cite even one (1) macroeconomics textbook that uses the word 'Ex-Nihilo' to describe the money creation process. LK (talk) 06:59, 16 June 2011 (UTC)

So now you're resting your entire argument on the phrase 'Ex-Nihilo". The phrase 'Out of nothing' however is properly cited from a reliable source. YOU are repeatedly removing this reliably sourced information from the article and falsy claiming it is POV. If you are unaware that the money for QE, OMO or Deposit Multiplication ( in FRB) is created 'Out of Nothing' then frankly you have no real knowledge of Ecnomics and monetary policies. But that is nether here nor there as the information you are removing from the article conforms to being veryfiable frmo a reliable source and thus complies with Wikipedia guidelines. You've now proven your [political bias by bringing up such accusations of libertarianism and proven your disingenuous behaviour by accused those who resist your bias as being 'disruptive. I advise you quit your edit warring and restore the properly sourced information you have removed before you inevitably get sanctioned. Vexorg (talk) 07:09, 16 June 2011 (UTC)

..... but finding a reputable and authoritative source that mentions Ex-Nihilo several times wasn't difficult to find .... http://mises.org/books/desoto.pdf for example. Or here's another source http://www4.gu.edu.au:8080/adt-root/uploads/approved/adt-QGU20091214.151206/public/02Whole.pdf - Looks like your arguments are collapsing rapidly Mr L K Hoo .. And why stop there ... here's a Daily telegraph article which mentions the phrase Ex-Nihilo in regards to the creation of money for QE .... http://www.telegraph.co.uk/finance/comment/liamhalligan/8484530/Americas-reckless-money-printing-could-put-the-world-back-into-crisis.html - All these sources will be used in this article Mr L K Hoo. Verifiability Mr L K Hoo. Vexorg (talk) 07:18, 16 June 2011 (UTC)

Since you have failed to understand me, let me reinterate. Kindly cite even one (1) macroeconomics textbook that uses the words 'Ex-Nihilo' (or the phrase 'Out of nothing') to describe money creation by central banks. LK (talk) 07:43, 16 June 2011 (UTC)

WP:V is not a defense against accusations of WP:POV. All these links prove is that somebody agrees with you. The citations are to a book published by the von Mises Institute, a business school dissertation that self-describes as criticizing "[m]ainstream macro-theories", and an opinion column. Each of these is guaranteed to carry a strong POV.

Re canvassing, you are free to examine the list of editors I invited in my contribs. You'll find I invited editors based on their past participation on this issue rather than their position in the debate. I'm arriving at an opinion on the issue, but I'm only interested in achieving true consensus. Lagrange613 (talk) 08:02, 16 June 2011 (UTC)

I think the sources you cite pretty clearly show that the phrases "out of nothing" and "ex-nihilo" are phrases mainly used about quantitative easing by people who against the policy, and maybe even want to scare laypeople about it. I don't think these phrases add anything to the understanding of the subject, as "creating money" already pretty clearly indicates that money is made to appear where it didn't exist before. To me including these phrases just serves to drag the lead into a discussion which isn't appropriate to have there, as supporters of QE could add just as well add:"This btw happens all the time in modern monetary systems", to which opposers could reply: "but usually not in these extents", to which supporters again could reply: "desperate times call for desperate means" and so it could go on and on.TheFreeloader (talk) 08:16, 16 June 2011 (UTC)

Arbitrary break

Okay, so I have been involved in the past with this article. Experience has told me that a battleground mentality already exists on this article, so I'm not about to get dragged into a lengthy discussion here when conspiracy theories are already flying. Nonetheless, I shall make a suggestion. It is clear that what we have is very similar to the "Printing money" debate; maybe even the same debate (I have no knowledge of OMO to comment). Therefore, it would undoubtedly be best to create a new section or edit the existing "Printing money" section to outline both sides of the argument, and add your relevant sources, who supports which view, etc. The lead should include a neutrally worded sentence suggesting that the process has been described as ex-nihilo, and that this has been contested. Interested readers can then read both sides of the debate further down in the article, where there is sufficient space to give some to each side of what is clearly a debate that has no "right" or "wrong" answer (it may do in real life, I don't know; but here on WP, it doesn't. Thank you and happy editing. - Jarry1250 ^{[Weasel? Discuss.]} 09:58, 16 June 2011 (UTC)

I don't think the comparison to the "printing money" debate is quite apt here. "Printing money" has been quite a ubiquitous description of quantitative easing, which has often been used by the media. The phrases that money is created "ex-nihilo" and "out of nothing" have however only had limited use, and mainly used by people opposed to the policy. I don't think it is Wikipedia's job to report on every piece of rhetoric made up by the minority in opposition to this policy. It's just like we don't have sections which discuss whether or not this quantitative easing is "debasing the currency" or if it is like the hyper-inflative policies of the Wiemar Republic or Zimbabwe. The wording of this article should however reflect how the most commonly accepted reference texts on this subject describe it.TheFreeloader (talk) 11:15, 16 June 2011 (UTC)

(edit conflict)

Let's remember that WP:NPV is not about 'presenting both sides of the debate, and let the readers decide'. It about 'presenting views with due weight according to what is found in reliable sources'. Given the fringe nature of of the 'ex-nihilo' viewpoint, and the non-RS nature of the supporting sources, I would oppose any significant weight in the article, and definitely not in the lead, lest we validate a fringe view (per WP:GEVAL). LK (talk) 11:20, 16 June 2011 (UTC)

I never said you had to give equal weight to both sides. Just that clearly there are enough sources to support the "ex-nihilo" view to give it some coverage in the body. Maybe a new section is overkill; but a paragraph in the main body of the article and a sentence in the lead (even if it includes the words "...is rejected by mainstream economics such as...") seems like a compromise proposal here. - Jarry1250 ^{[Weasel? Discuss.]} 14:07, 16 June 2011 (UTC)

Setting aside POV for a moment, as I've said above, the ex nihilo characterization is of OMO, not QE. This article's lead (and arguably its body) is not the place to introduce controversial characterizations of OMO, especially if they are going to require equivocating statements that read like "rejected by mainstream economics". The longer it takes for the language's supporters to produce NPOV sources that aren't dumbed-down media accounts (like the one with the reporter in auto mechanic's overalls) the more concerned I get about coatracking. Lagrange613 (talk) 16:06, 16 June 2011 (UTC)

Do any third-party sources characterise QE as "ex nihilo"? That is the question. My suggestion above was based on the idea that at least one did. - Jarry1250 ^{[Weasel? Discuss.]} 16:14, 16 June 2011 (UTC)

Yes 3rd party sources do explain the QE money creation is being "ex nihilo" - Out of nothing. I've linked to THREE above, one of which is now added to article. Reliable sources ources for the phrase "out of nothing" have already been in the article. Vexorg (talk) 20:21, 16 June 2011 (UTC)

Vexorg, I see you have restored the "ex nihilo" language in the absence of consensus. Please stop edit warring. Lagrange613 (talk) 20:47, 16 June 2011 (UTC)

The fact of the matter is, and this is supported for inclusion into Wikipedia by now several reliable and verfiable sources, that the money for QE is creating Ex-nihilo(out of nothing). Lagrange613 uses the phrase 'dumbed down media accounts' - well if you hve a problem with such then I thin better start editing the rest of Wikipedia as probably 50% of it's sources are 'dumbed down media accounts'. I'm no fan of the mainstream media, BUT, it's articles for better or for worse are seen as reliable sources for Wikipedia.

It's also hilarious that anyone would be so desperate as to claim that money created 'out of nothing' it was a 'fringe view' in order to argue against a fact. Vexorg (talk) 16:30, 16 June 2011 (UTC)

Ex nihilo is not a common useage but it clearly means 'out of nothing'. There is absolutely no doubt whatsoever that the QE money is simply invented out of nothing by the central bank to ensure that assets can be purchased using this power of the central bank to ensure a deflationary outcome is avoided where it is crystal clear 100% reliable sources can be found to show the central bank has infinite power to create money out of nothing to prevent deflation providing the political forces involved will allow the central bank to take this action.

Children should be able to understand wiki and few children or economists use the phrase ex nihilo so 'out of nothing' or 'out of thin air' or 'money printing' are better choices, so that a child can understand what is happening during QE. BOE Governor Kings use of 'created electronically' is a bit vague and not sufficiently clear without the rest of the text that appears on the BOE video.

From the BOE: http://www.bankofengland.co.uk/publications/quarterlybulletin/qb090201.pdf

The Bank of England is the sole supplier of central bank money in sterling. As well as banknotes, central bank money takes the form of reserve balances held by banks at the Bank of England. These balances are used to make payments between different banks. The Bank can create new money electronically by increasing the balance on a reserve account. So when the Bank purchases an asset from a bank, for example, it simply credits that bank’s reserve account with the additional funds. This generates an expansion in the supply of central bank money. Andrewedwardjudd (talk) 17:12, 16 June 2011 (UTC)Andrewedwardjudd

By the way, The boe specifically says it is not monetizing the debt because the intention is to sell the assets that have been so far purchased. Arguing that credible people have not been associating QE with debt monetization is daft. A child should be able to understand peoples fears about QE and why the BOE feels the need to reassure people. Andrewedwardjudd (talk) 18:25, 16 June 2011 (UTC)andrewedwardjudd

For what it's worth, I feel much the same as LK; that the relentless emphasis on 'Ex-Nihilo' does nothing to improve NPOV, and the most reliable sources generally use rather different language, notwithstanding the bizarre fascination in money creation, and related subjects, that seems to be held by certain fringe groups. It's trivially easy to google up thousands of articles that say Obama is incompetent - that doesn't mean we have to repeatedly add "incompetent", and synonyms, to the lede of Barack Obama whilst pretending that WP:V is justification. bobrayner (talk) 21:05, 16 June 2011 (UTC)

'incompetant' is a subjective assement. Creating money out of nothing is objective. It's the actual method used. Your analogy is invalid Vexorg (talk) 21:57, 16 June 2011 (UTC)

I see two concerns with the language that haven't been answered by its supporters, and I'm going to try once again to get them to address them directly. (The order is reversed from the last time I brought this up, for clarity.)

1. Is the characterization of OMO as creating money "out of nothing" POV? If so, then it needs to be handled with greater care in the article. Citation of sources that exhibit a clear POV (such as the three Vexorg has listed above, the least reliable of which, the opinion column, Vexorg unilaterally inserted into the article a short while ago) and folksy BBC stories are sufficient only for language reading like, "The central bank does this through open market operations, which have been characterized by some sources as creating money out of nothing". This is an article on a technical subject, so to justify the language as it currently exists requires a more reliable source, like a mainstream academic publication or a policy statement from a central bank or similar institution.
2. Is the lead of this article the place to put a characterization that's clearly somewhat controversial? If not, then "out of nothing" may belong somewhere else, but not here. I submit this is especially true if we need to expand the language to make it NPOV as described above. The lead of this article cannot become an article unto itself about who calls it "out of nothing" and who doesn't. Lagrange613 (talk) 21:17, 16 June 2011 (UTC)

You need to be asking the people who oppose the inclusion of the actual method of the creation of money whether 'Out of nothing' is POV. The money is created "Out Of Nothing". That is a fact, which is also verifiable. There is nothing POV about it. End of. Anyone who disagrees, either isn't qualified in the process or has an agenda. There are people in this discussion arguing against the inclusion of objective, pertinant and reliable sourced verifiable information.

I suggest we take this to a higher level so we can weed out any agenda's that appear to be manifesting themselves here Vexorg (talk) 21:57, 16 June 2011 (UTC)

Oh and Lagrange613 (talk) before you start leaving message on my talk page, you may wish to note that I have added a reliable source for 'Ex-Nihilo' in the article and thus improved it and removed the complaint from Mr L K Hoo (talk) that the phrase wasn't in the sources. Vexorg (talk) 21:57, 16 June 2011 (UTC)

Vexorg, the burden is on you to establish that what you are restoring is proper. I am trying to build a dialogue with you to find a way forward; you are refusing to engage, instead throwing around WP:COI accusations. Furthermore, reverting absent consensus constitutes edit warring, so please don't do that again. Lagrange613 (talk) 22:53, 16 June 2011 (UTC)

I have established what I am restoring is "proper". Several times. If you chose to ignore that then that is your problem I'm afraid. what I have restored is verifiable, NPOV and is cited by more than one reliable source.

Claiming I am 'refusing to engage is false accusation. on the contrary I am engaging more than anyone in this discussion. You don't appear to be challenging those who are throwing around claims of POV for a mechanism of creating money for the QE process which is factual and verifiable.

The onus [ burden ] is now on those claiming "Out of nothing" is POV to show that. If anyone can provide evidence that the money is not created out of nothing then please show this evidence.

So basically the money is either created out of nothing or it isn't. If it is created out of nothing then that should be stated succinctly and early in the article to establish the process in a manner which can be understood by EVERYONE. Vexorg (talk) 00:00, 17 June 2011 (UTC)

Linking WP:BURDEN was insufficient, so I'll quote the first sentence here: "The burden of evidence lies with the editor who adds or restores material." Because you are the editor adding or restoring material, the burden of evidence is with you. The current language suggests that the characterization of OMO as creating money "out of nothing" is a mainstream view; if it is not, then the lead is POV. I would like you to address specifically my concern (#1 above) that none of the sources you provided establish that it is a mainstream view. Lagrange613 (talk) 00:13, 17 June 2011 (UTC)

You appear not to be understanding the process of creating money. Creating money "out of nothing" is NOT a 'view' it's a 'FACT'. I've told you already that I have provided more than enough information to show this fact and provided verifiable and reliable sources to that effect. I appreciate that Wikipedia works upon verifiability, not truth, so I have provided verifiable and reliable sources. I have already addressed your point #1 several times and as I have already stated, if you choose to ignore that then that is your responsibility. If you continue to ask for things that have already been provided then it's likely you will be seen by administrators as a timewaster. In order that you are able to continue to participate in this discussion with more value I suggest you acquaint yourself with the process of QE, OMO and deposit multiplication. Those who understand the processes know that they an objective mechanic and not subject to a 'view'. The US Federal reserve published a document called Modern Money Mechanics, which you might find useful. Vexorg (talk) 02:33, 17 June 2011 (UTC)

Lagrange613, no mainstream source is going to dispute that QE money comes from no existing place on the planet. If you think otherwise then you would need to provide a reference to the talk page for discussion. Wik should be written in a manner that is easy for an ordinary person to understand. There is nothing wrong with out of nothing or out of thin air in the context of making the topic easier to understand for a child or unsophisticated user.Andrewedwardjudd (talk) 02:49, 17 June 2011 (UTC)andrewedwardjudd

• Vexorg: Claiming that you have done something is not the same as actually doing something. You continually claim that you are re-adding properly sourced material, and that the sources show that you are correct. Everyone else disagrees. It is policy to abide by consensus, even if you disagree. Not doing so is indicative of tendentious editing. Stop edit warring against consensus.
• Andrewedwardjudd: Regardless of any beliefs you may hold about how textbooks and academia may be mistaken, it is the job of Wikipedia to report first and foremost what is in reliable sources like text books, academic handbooks and other encyclopedia. The WP:TRUTH of the matter is not a proper justification for inclusion.

LK (talk) 04:40, 17 June 2011 (UTC)

WP:truth is an insulting essay in the context you are using it, as i have already made clear to you and others. The facts are clear. Text books are not reliable sources of information for rapidly changing central bank policy decisions. Andrewedwardjudd (talk) 05:37, 17 June 2011 (UTC)andrewedwardjudd

Mr LK Hooo (talk), your problem is that you are arguing against the facts. For some reason, which is beyond me, you are disagreeing that the money is 'created out of nothing' - You've continually called the creation of the money 'out of nothing' as being a POV. You are clearly not qualified to edit an article on Public Finance if you don't even know how money is created. It must be dreadfully embarrassing. I have added propeerly and reliably sourced information in my edits. The fact that you want to remove those deosn't bode well for any claims you might have to improve Wikipedia. I am beginning to take notice of those who claim you have an ulterior motive. Vexorg (talk) 16:48, 17 June 2011 (UTC)