Visualizing ‘Quantitative Easing’

When the global financial crisis hit, the U.S. Federal Reserve — the bank of banks — responded with the euphemistically named ‘quantitative easing.’ Historically, this has been called printing money. That is not exactly what the bank has done, since most of the money it is creating will never be printed. It exists in the reserves of the banks being bailed out. Nonetheless, the money they are creating is added to the U.S. monetary base.

This is what the Fed’s actions look like. From January, 1955 until August, 2008, the base per person grew at a rate of 0.38% per month, or, 4.6% per year. Then, in September, 2008, it grew 7.3%. October: 21.9%. November: 29.5%.

So-called ‘quantitative easing’ constitutes a dramatic shift at the Federal Reserve. Yet, the meaning of that shift is little debated and poorly understood.