Publications

Quantitative Easing—Beijing Style

March 16, 2016 8:00 AM PDT

By Jason Hsu

The U.S. Fed’s recent rounds of quantitative easing are often understood as a vehicle of the Full Employment Act – and rightfully so. It works like this: the Fed expands its balance sheet by borrowing digital currency from the universe, as if posting IOUs to God; the Fed then lends that money to the U.S. government in exchange for Treasury bonds; and the government spends that money to stimulate U.S. employment and growth. With each new round of easing, the U.S. government’s debt grows in tandem with the Fed’s balance sheet.