Quest Means Business   « Back to Blog Main
March 6, 2009
Posted: 1650 GMT

"PRINTING MONEY" scream the newspaper headlines. Not surprisingly many of you are getting worried about the possiblities of inflation. We have all been taught printing money is a recipe for economic calamity.

The Bank of England has decided to introduce quantitative easing.

The Bank of England has decided to introduce quantitative easing.

Remember Weimar in Germany; the wheelbarrows of cash required to buy a loaf of bread? Or Mugabe's Zimbabwe, where inflation is running at 230 million percent because the central bank has printed so much cash? You can stop worrying. Now.

There is a world of difference between the so-called quantitative easing being introduced by central banks like the Bank of England, and running the money printing presses willy-nilly thus stoking hyperinflation.

First and foremost, inflation in major economies like the U.S. and EU is falling Today the fear is deflation. The money being printed is actually trying to turn that around. There is little danger of sudden hyperinflation before we have a chance to do something

Secondly, the money is being used to buy government and corporate bonds. It is being channeled through the banks, and hopefully onto consumers. It is not being handed to the government to pay everyday bills with no thought to how or where. In previous disasterous cases the money was used to pay wages, and there was no end in sight. It was out of control.

Finally, this is all being done in the full glare of the markets and transparency. We know how much has been approved and when. Government and central bankers have a firm hand on what is being done and why. We also know that there is an exit strategy for when the economy does turn around.

For those who are worried about the environmental effects of all this printing (well, of course, they are not actually going to print bank notes): Commercial banks have accounts with the central bank. Those accounts will be topped up automatically and electronically. Literally, the accounts will suddenly be much healthier and richer.

Yes, this is new territory for most countries, and the bankers admit they don't know quite how it works, but they are doing it carefully and with thought.

Are you still worried ?

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Filed under: Banking •Quest Means Business


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nico   March 6th, 2009 7:42 pm ET

How is the money "not being handed to the government to pay everyday bills with no thought to how or where" by buying government bonds... ?

Mo   March 7th, 2009 12:30 pm ET

Yes I am worried. The article looks like a support to printing more money as an answer to the crisis though it admits it has no clue what will happen later. The money which is already in the market is still in the market though dow jones lost more than 50% in value. Printing fresh money is just going to create more trouble for all of us who save our earnings for our kids education, to buy a house, for our retirement etc. This is bad idea.

Actually Educated   March 7th, 2009 2:10 pm ET

This guy is a quack.

"...hopefully onto consumers." – It won't. It hasn't at this point.

"Finally, this is all being done in the full glare of the markets and transparency." – HA! HA! HA! You have got to be joking me! Is he serious? There hasn't been any to this point.

"Those accounts will be topped up automatically and electronically." – And The Average Joe has to earn his money. These guys print it and make interest. They HAVE made lots of interest at this point.

"...and the bankers admit they don’t know quite how it works" – Go Youtube "Money as Debt". They know what they're doing. Robbing you. They've robbed you a lot at this point.

You get the point?!

james s roberts   March 7th, 2009 6:25 pm ET

YES, ABSOLUTELY YES I AM WORRIED.

We're robbing Peter (our children and grand children) to pay Paul (current situation caused by greedy, self centered, treacherous LEADERS [government, labor, commerce and yes Faith based since they were silent and therefore complicit])

The government continues to lie to American public, and finds itself repeatedly restating circumstances; AIG is a classical example, along with GM doubting it can survive even with another infusion of capital, major banks reported losses going higher and higher each quarter.

There is no oversight in TRILLIONS, yes TRILLIONS being given to institutions, as evident by recent congressional hearing.

American assets, G7 assets are overstated and haven been. The sooner the government allows their value to reset, naturally and to appropriate values the better.

The pain will be great but who better to bear it then the generation that caused it. The patient will come back, slow er, longer recovery, but it will come back stronger.

Daniel Sudarsky   March 7th, 2009 8:30 pm ET

" bankers admit they don’t know quite how it works, but they are doing it carefully and with thought"

If this is not self-contradictory, it comes very very close!

Miers   March 8th, 2009 2:54 am ET

From Down Under I say: Yankee Doodle-youre mad!And no- you dont know what youre doin.

Bart van der Gaag   March 8th, 2009 6:13 am ET

I'm not sure that you really understand economic principles when you suggest that by creating billions of dollars out of thin air won't create inflation. It's hardly relevant how these billions of extra cash are "channelled".

I understand that you're trying to calm the masses, but your last statement "Yes, this is new territory, and the bankers admit they don’t know quite how it works" now that should really give you an idea of the "willy-nilly" economic policies being used to handle the problem.

I'm sorry Richard, you should retract this little article, it doesn't help your credibility.

ED   March 8th, 2009 7:52 am ET

Yes, I'm still worried!

BRUCE RUBIN   March 8th, 2009 10:40 am ET

O please, the world is falling apart because the entire body of world governments is a prime example of the Peter Principle.In America the US government legislate by the legalized bribe system and it has collapsed the world economy. China is probably holding the best relatively to were they were 15 years ago primarily because the income tax on the poor and the middle class is 3 percent.In the USA It works out to about 50 percent if you include Social Security.

Sam in Spain   March 8th, 2009 10:58 am ET

You bet I'm still worried, I'm worried that it will just be wasted again as this Government seems to waste plenty. They have fallen down most lists. Health, Education, Infastructure, Security, etc. and they are still in the dark. You talk about the "Blitz" in the old days when all the light had to put out because of the war, well it seems that they have forgotton how to turn them on again. If the money is to be invested into assets as one paper has suggested, then does that mean that Savers and Pensioners (vested interest) no longer are assets but liabilities? You try telling that to the Grey Hairs or the no hairs. If the commercial banks are so clever, how come they are losing all the money to the Building Societies and forcing them to start paying extra to bail out their competitors? and why doesn't Gordon and Alastair bring forward the link with wages so that pensioners are not forced on to the bread line? No Brain – No Pain. As Far as Banks are concerned I wouldn't trust them as far as I could throw them and that goes for ALL OF THEM

srinivas charlu   March 8th, 2009 12:13 pm ET

There is no doubt that quantitative easing (or to use another term monetising the fiscal deficit) leads to inflation –as 50 yrs experience of India shows –when what started out as a temporary remedy in mid 50's became a permanent feature of public policy & finance. The trick will be in stopping the money supply expansion the moment inflation rears its head in say 12 month's time -irrespective of the pain it will cause to the economy or the incomplete recovery towards normal employment levels. While there is s priori reason to believe that banks will behave better this time around -I suppose there is alternative either now that interest rates hv been virtually brought to zero.

Gert Fahrnberger   March 8th, 2009 2:56 pm ET

Richard,

I think that it does not matter how the money is used. If there is no actual underlying value such as additional economic output, additional money supply will inevitably lead to inflation.

John   March 8th, 2009 5:36 pm ET

"They don’t know quite how it works." Answer your question?

Spencer Forrest   March 8th, 2009 8:53 pm ET

"We also know that there is an exit strategy for when the economy does turn around." Not a chance! They are grasping at straws...the global contagion of inflation is coming...will start with food, then spread to engergy, then all commodities...get ready.

Ori Ginor   March 8th, 2009 9:19 pm ET

What can be worse than inflation right? Well, better they spend cash they don't have and end up with inflation than spend nothing and wait for prices to come grinding down. Deflation is just around the corner...remember Japan? We'll have to wait and see. If Gordo gets it right he'll be the messiah, if not, he'll be locked up in the stockade!

Twyman   March 9th, 2009 6:50 am ET

Are you kidding? the economy goes to hell in a hand basket and you have the audacity to presume that an environmental factor relating to the printing of currency is somehow a concern? And then to say that electronic funds which are created out of nothing anyway are the solution? I dare you to print this and suggest that the cancer on this country and world as a whole IS the central banking system IN PRIVATE HANDS! Yes, we need central banks, NO we do not need them operated by private interests who run the Federal Reserve solely for the sake of profit. We do not need the Rothscheilds, Vanderbilts, Rockefellars and other robber barons running the show, and by the way, our MEDIA. The solution is in fact for the U.S. government to print interest free currency, and use that to pay off the bonds keeping the rate of currency proportionate to consumers needs all the while, until the banks reach 100% reserves... physical money, not this hybridized version of monetary reform is only intended to placate a restless angry nation to buy time so the Federal reserve, which is neither Federal nor a reserve (Its phone number is in the White pages next to Fed Ex,) can survive and do what its always done... enslave the World through manipulation of finance.

Christopher M. Vancouver,Canada   March 9th, 2009 1:31 pm ET

So basically it is a big experiment. Sheesh, I am starting to feel better already.

Tomas   March 9th, 2009 2:03 pm ET

Let's look at the UK. Headline inflation is still at around 3% despite a 70% drop in oil prices, the currency has lately depreciated by over 30%, and the central bank has been given the go-ahead to create money. I am worried? Of course I am and so should everyone else be. We are in the hands of the very same people that created the mess in the first place. Good luck to us all.

Raul   March 9th, 2009 4:05 pm ET

After reading end of article, now I'm really worried!!!!!!!!!!!!!!!

Robert Martin   March 9th, 2009 8:12 pm ET

Dear Richard,

Enjoy the show as it very informative and done in a easy relaxed manner. Could you inform viewers like me why does thye President of the US sign legislation using so many pens.

Best wishes

Robert

plha   March 9th, 2009 9:04 pm ET

"... this is all being done in the full glare of the markets and transparency..."

"...this is new territory for most countries, and the bankers admit they don’t know quite how it works, but they are doing it carefully and with thought"

These sentences somehow scare the hell out of me...

JJJ   March 10th, 2009 7:41 am ET

The author does not know what he talks about.
He suggests that it OK to print money without any additional
capital to support them.
Sound like a purely political stuff, written to placate the general
public.
I suggest he goes back to school.

YN   March 10th, 2009 9:01 am ET

Comments about this aricle:
Quote:
"First and foremost, inflation in major economies like the U.S. and EU is falling Today the fear is deflation. The money being printed is actually trying to turn that around"
The deflation is not something to worry about. It just means that the prices go back to what is normal. This is what market economy is about.

Quote:
"Secondly, the money is being used to buy government and corporate bonds. It is being channeled through the banks, and hopefully onto consumers."
The consumers are not going to keep this money at home. They are going to spend it. Consequently, inflation will follow. It will however come after a time lag.

Quote:
"Finally, this is all being done in the full glare of the markets and transparency."
That is really the only positive aspect of what happens. At least the general public will know what the goverment does.

Quote:
"Commercial banks have accounts with the central bank. Those accounts will be topped up automatically and electronically. Literally, the accounts will suddenly be much healthier and richer."
Money is nothing if there is not capital to back it up. The last statement suggests that we can create something out of nothing and cure the ailing banks. If this remedy works it will be just for a short while.

Best of luck,
YN

Nono   March 10th, 2009 10:12 am ET

And you are following the econimic school of?
I think that one that is led by Mister Mugabe of the Zimbabwe Economic school. That states if you have a problem print some money. If you have a bigger problem print some more money. If you have a realy big problem print a lot of money.

Sorry but history is against your post. All fiat currency have failed because in the end the goverment always start printing money. Fiat currency is backed by ... well paper money.

Andreas Hartung   March 10th, 2009 11:04 am ET

Talking of printing money – what would all that printed money PHYSICALLY look like?

In your show you have talked about staggering numbers being tossed around like juggling balls many times and tried to put them in perspective, like how many Airbus A380s does the bail-out money buy etc.

Now here is a neat way to visualize just how much 1 trillion Dollars is:

http://www.pagetutor.com/trillion/index.html

Might be an interesting and entertaining bit for your program 😉

Beat   March 10th, 2009 11:45 am ET

If anyone is playing POKER there are losers and winners. The loser exactly knows where the money goes. In this banking crises we only
know the losers. Now where has the money gone which was lost in this case? There should be no lending if the balance is not covered with
real money....

Adrian   March 10th, 2009 11:48 am ET

The first economics lecture I ever had at university was about how the printing of money recklessly only leads to runaway inflation. Now I understand that the circumstances we currently find ourselves in is quite extraordinary with deflation being a possibility in the developed world. Problem being that after years of the BOJ following the policy of "Quantitative Easing" no one even knows if it has worked. Unfortunately living in South Africa I clearly see the effects that printing of money can have on a nation (Zimbabwe) if it is done recklessly. I only hope that there is more transparency and accountability from the central banks and governments than there was from the commercial banks.

Alex Zhyk   March 10th, 2009 2:01 pm ET

Thanks for explaining. Why not to say that we are printing the money that our banks had already lent to us?
The only problem is that those money will cover bad debtors while putting the burden on healthy part of the society. Want to know what will happen next? You may look at Japan's development for the past 15 years. No innovation no new markets, just the same things only bit more refined.
Basically this quantitative easing is a way of saying: "according to capitalist doctrine we all up to the neck in the mud, but we can close our eyes and ears and pretend that we are on top of the world because getting out of this mess is too painful".

F. Huber   March 10th, 2009 8:04 pm ET

You were rather off the mark tonight, Mr Quest, when you said that German banks rose by 6,7 or 8 percent.
Deutsche Bank closed 17 percent up.
http://www.ariva.de

Mit vielen Grüssen aus der schönen Schweiz!
F. Huber

Derek Weiss   March 11th, 2009 6:35 am ET

Yes, I am still worried ! I can see now why Richard Quest was demoted within CNN. He provides no answers in his article, and just the fact that it ended with a question, has actually had a chilling effect on me. The people are very worried, and you nor anyone else has any answers at all.

Erik   March 11th, 2009 6:40 am ET

Worried? "and the bankers admit they don’t know quite how it works". Wasn't that the root of the problem in the first place?
Let's just sit it out and enjoy the positive environmental side effects of this crisis.

Peter   March 11th, 2009 9:51 am ET

Printing money reduces the value of the pound, and therefore acts like a tax that every UK citizen is paying. Unlike normal taxes, the poor will pay the same percentage as the rich. If normally you think it is fair that the rich pay a larger percentage in tax than the poor, then I do not see how you could defend printing money.

OldTom   March 12th, 2009 4:20 am ET

Yeah, Richard. And I've got this bridge....

Alen Horecky, economist   March 12th, 2009 7:50 am ET

I do not know who created this stupid ideas but if somebody add money to his account whithout to earn them by work this money would have to go to their real lower value together with all other money which value their will decline. From this could be only hyperinflation. You want to buy goverment bonds but from what? From money which you just write on your account? You could write to your account so much money as you want but you did not earn them and you did not create anything against it no goods. This is most quick way to catastrofy. Inflation means that there is more money on the market as goods. But now you put just money on the market no goods. Im only from small country but this is clear for me. Your bank managers could go for seminar to Zimbabwe.

Tom Armiak   March 12th, 2009 11:44 am ET

You would think that CNN would hire personnel that have a grasp of economic fundamentals and not act as a surrogate of Governments trying to convince the public that an increase in money supply is not necessarily inflationary. CNN and Fox News utter sheer nonsense when it comes to economics, money, the markets, etc. While not entirely responsible for the current economic downturn, CNN certainly contributed as it misinforms the general public on a daily basis.

Sharon Mc   March 12th, 2009 3:46 pm ET

You better run, the whole Europe and US are going to collapse. This post is certainly try to buy time to sell out everything while you foolishly reading it. By the time you finish reading, the guy that write this article has taken his money and run.

Naeem   March 13th, 2009 5:45 am ET

" the bankers admit they don’t know quite how it works, but they are doing it carefully and with thought."

Haven't bankers played a big part in creating the mess the world finds itself in today? So, you are telling us that although they don't know what they are doing, we should "hope" that this won't cause hyperinflation. Trust governments and central banks? To me it seems a bad way to fix a problem those guys created for the rest of us.

JesterJames   March 13th, 2009 6:37 am ET

yes, i'm still nervous about it. Because money is fungible, to say you can channel the new money only into certain area, so as to minimize and potential negative effect , is a promise you have absolutely no power to keep.

stephan   March 13th, 2009 10:30 am ET

yes, extremely worried, and you should be too 🙂

masai   March 13th, 2009 10:58 am ET

Dear Mr. Quest,
I find your show informative, interesting and entertaining. I'm curious to know what you think about the views of Jon Stewart (host of The Daily Show) regarding the financial turmoil and the roles that various institutions have played in letting things reach such a breaking point.

Geir   March 13th, 2009 2:41 pm ET

Still worried?

Yes. Yes I' am.

Frank Amsterdam   March 13th, 2009 3:36 pm ET

Your last sentence: the bankers admit they don’t know quite how it works, but they are doing it carefully and with thought.
worries me the most!

Joe Sussmann   March 18th, 2009 11:06 am ET

Printing money is, for some banks, ok, as long as they nominate them from 1000 units (in Europe or USA) down to one. It's only dangerous when they print for circulation 'Monopoly' money. After all, on the English ones it does say : I promise to pay the Bearer the sum of ..... (what a promise !) and there is another message bearing one 'InGod we trust' (It does not say who is 'we'). With such very encouraging messages surely nothing bad can or might happen ?
I mean it does say 'promise to pay', doesnt' it ?

wilfred   March 19th, 2009 10:38 am ET

Am wilferd from Kenya I agree with the worried lot coz this is serious matter at hand and I think by printing more money is creating more problems so Mr. Quest if they mean business like yiur programme is, then the Western countries should act ang listen to your views. Hey! you could be the finance minister intead of them!

Dayo   March 20th, 2009 2:02 pm ET

Quest,
I have a very simple question for you, Whom, who or which group of people own the US fedral reserve.
I am asking because I was told by a friend that it is privately owned not knowing much I have been researching it for a week now. I have been on the site of the feds but nothing much about it real ownership structure. I found some interesting site that claim the fed is owned by
some individauls with major stake in major bank, now you are confused like I am ....
http://www.the-fed.com/ Enjoy and pls answer the question so I can ask you the next question.
Which is so who is bailing out whom?
Dayo

KingofthePaupers   March 27th, 2009 7:22 pm ET

Jct: Consider that inflation can not only be more money chasing the goods, Shift A, or less goods after foreclosure being chased by the same money, Shift B, caused by interest.
With interest=0%, money works like poker chips, forever keeping its value of the collateral pledged in the cage.
Best of all, when all the new community currencies peg their local currency to the Time Standard of Money (how many dollars/hour child labor) Hours earned locally can be intertraded with other timebanks globally!
In 1999, I paid for 39/40 nights in Europe with an IOU for a night back in Canada worth 5 Hours.
U.N. Millennium Declaration UNILETS Resolution C6 to governments is for a time-based currency to restructure the global financial architecture.
See my banking systems engineering analysis at http://youtube.com/kingofthepaupers with an index of articles at http://johnturmel.com/kotp.htm

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Martha M. Trescott   April 5th, 2009 9:30 pm ET

I was trying to leave my comment when it was interrupted. I just wanted to say that not only is Richard Quest's informatiion helpful but also his droll style is helpful in this difficult time. I agree with his remarks here, that 1) we are in a deflationary time, as I've been tellling people for the last few months, 2) the central banks know much better now, certainly, than in the Great Depression how to deal with these difficulties and that they won't allow runaway inflation. "High-powered money" is not a concept one hears much but should be kept in mind when discussing central banks and monetary policy, I think. Occasionally, one hears Milton Friedman mentioned, but mostly ecoonomic policy in the U.S. seems Keynesian to me right now. I would like to hear Richard on high-powered money sometime.

Also, I notice in today's CNN Business the story about oil towns in difficult straits. Any comments on the oil and gas industry in the U. S. and elsewhere would be welcome, as we're not getting too much information on that. Natural gas is a good, clean energy source that should not be overlooked! Also, it is plentiful in the U. S. Finally, I heard today that Richard will be in New York in September for more of the G-20. I do look forward to that. We don't get his daily show from London on CNN, I think. I wish we could! He's really good on business and economic matters, and his humor helps keep spirits up! Thank you so much. I was fortunate to get to hear Richard today at midday with Ali Velchi, who also is helpful on money matters. In fact, I've used his phrase "Gimme My Money Back" several times in asking for help with my life savings, annuity, etc. Martha M. Trescott

Gonzalo   April 7th, 2009 9:09 pm ET

Hey Mr. Quest, what is wrong with you for writing this?? I like your simple way of writing things but this is way too simplistic!! and I am starting to doubt about your expertise and credibility!

YES IM WORRIED ABOUT PRINTING MONEY, you know there is a phrase very difficult in relationships and economics and that is: "THIS TIME IS GOING TO BE DIFFERENT!"

I suggest you better change your mind, otherway you're loosing some subscribers here!!

Boaplycycle   April 14th, 2009 4:54 pm ET

Roxana! http://www.furtherfield.org/njenkins/dirge/archives/000026.html
can you At the lowest level, all computers are programmed with strings of ones and zeroes

Alen Horecky, economist   April 20th, 2009 8:48 am ET

They can do what they want they are worry about deflation but they are quickly going to hyperinflation. There is so big amount of money on in the benks that its not possible to solve this problem. This world is going to black deep to hell very quickly. This guies do not have the right to be on their positions well paied.

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