Digital Printing Press

Now that ain't working
That's the way you do it
Lemme tell you
Those guys ain't dumb
--Dire Straits

In an interview on 60 Minutes last night, Fed chair Jerome Powell uncomfortably discussed the central bank's 'secret' for dealing with financial crises: printing money. When Powell admitted that the Fed "flooded the system with money" in response to the recent market meltdowns a month, the interviewer asked (I am laughing as I type this), "Where does it come from? Do you print it?"

"We print it digitally," Powell replied. "So as a central bank, we have the ability to create money digitally. And we do that by buying Treasury Bills or bonds or other government guaranteed security [with the digital money that we created out of thin air, he should have added]."

This is called monetization of debt (or 'quantitative easing') and has been going on for much longer than the past two months.

What's changed is the sheer volume of monetization, and the realization that the Fed's 'digital printing press' policy will not be reversed.