Bunny: Why do they call it the quantitative easing? Why don’t they just call it printing money?
JDH: Actually no money is going to be printed. The Fed will pay for these purchases by crediting accounts that banks have with the Fed. Although it is true that banks could ask to withdraw these funds in the form of green currency, they currently are showing no interest in doing so. And before banks did start to want to withdraw these funds as money, the Fed plans to sell the assets off to bring the reserves back in. There is no plan now or in the future to "print a ton of money"
I understand Hamilton’s rationale for responding this way. He wants to assuage fears that we are headed towards some sort of Zimbabwean hyperinflation.
However, it doesn’t attack the misunderstanding head on. It leaves the sympathetic reader with a false sense of Fed policy and it leaves the unsympathetic reader with the feeling that he is being duped.
It is a tougher slog but a more productive one, in my opinion, to explain that traditional monetary policy involves printing money. If you didn’t fear that we were entering the last refuges of a dying economy when Paul Volker was cutting rates in the mid 1980s then you shouldn’t fear it now.