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Included definition of objects in assumptions.
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  1. The total amount of a currency is the sum of the physical money (e.g. coins and paper), and the amount of digital money of that currency.
  2. The total quantifiable value of an entity consists of the total amountEverything of currency+value that is not a currency (otherneither physical nor digital) objects, is referred to as objects. (likeSo objects include bonds, houses, foodart, sentiment, feelings etc.).
  3. The total quantifiable value of an entity consists of: the total amount of currency + (the value of) objects.
  4. "Money printing" implies that the total amount of a currency, e.g. the dollar, increases.

For example, a bondholder invests \$$ 20.000 (called face value) into a 10-year government bond with a 10% annual coupon; the government would pay the bondholder 10% of the \$$ 20,000 each year. At the maturity date the government would give back the original \$$ 20,000.

  1. The total amount of a currency is the sum of the physical money (e.g. coins and paper), and the amount of digital money of that currency.
  2. The total quantifiable value of an entity consists of the total amount of currency+(other) objects (like houses, food etc.).
  3. "Money printing" implies that the total amount of a currency, e.g. the dollar, increases.

For example, a bondholder invests \$ 20.000 (called face value) into a 10-year government bond with a 10% annual coupon; the government would pay the bondholder 10% of the \$ 20,000 each year. At the maturity date the government would give back the original \$ 20,000.

  1. The total amount of a currency is the sum of the physical money (e.g. coins and paper), and the amount of digital money of that currency.
  2. Everything of value that is not a currency (neither physical nor digital), is referred to as objects. (So objects include bonds, houses, art, sentiment, feelings etc.).
  3. The total quantifiable value of an entity consists of: the total amount of currency + (the value of) objects.
  4. "Money printing" implies that the total amount of a currency, e.g. the dollar, increases.

For example, a bondholder invests $ 20.000 (called face value) into a 10-year government bond with a 10% annual coupon; the government would pay the bondholder 10% of the $ 20,000 each year. At the maturity date the government would give back the original $ 20,000.

Added assumption on objects.
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a.t.
a.t.
  • 83
  • 6
  1. The total amount of a currency is the sum of the physical money (e.g. coins and paper), and the amount of digital money of that currency.
  2. The total quantifiable value of an entity consists of the total amount of currency+(other) objects (like houses, food etc.).
  3. "Money printing" implies that the total amount of a currency, e.g. the dollar, increases.
  1. The total amount of a currency is the sum of the physical money (e.g. coins and paper), and the amount of digital money of that currency.
  2. "Money printing" implies that the total amount of a currency, e.g. the dollar, increases.
  1. The total amount of a currency is the sum of the physical money (e.g. coins and paper), and the amount of digital money of that currency.
  2. The total quantifiable value of an entity consists of the total amount of currency+(other) objects (like houses, food etc.).
  3. "Money printing" implies that the total amount of a currency, e.g. the dollar, increases.
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a.t.
a.t.
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Why is quantitative easing compared to "money printing"?

Context

Some questions on this site ask about the difference between "money printing" and "quantitative easing". I am experiencing some difficulties to understand what some of the answers practically mean. Hence, I thought I would try to interpret the definition given by Wikipedia, and ask where my misunderstanding comes from.

Assumptions

  1. The total amount of a currency is the sum of the physical money (e.g. coins and paper), and the amount of digital money of that currency.
  2. "Money printing" implies that the total amount of a currency, e.g. the dollar, increases.

Quantitative Easing interpretation

This Wikipedia page can be evaluated with 3 entities with in brackets their total amount of currency:

  • Central Bank ($ 300.000) and 200.000 in objects

  • Government ($ 600.000) and 100.000 in objects

  • All other beings ($ 100.000) and 300.000 in objects

Suppose they in total have a total amount of currency of $ 1.000.000,-

Then the definition says:

Quantitative easing (QE) is a monetary policy action whereby a central bank purchases government bonds or other financial assets in order to inject monetary reserves into the economy to stimulate economic activity.

So Central Bank buys for $ 20.000 of government bonds from Government. The total amount of currency now is:

  • Central Bank ($ 280.000) and 220.000 in objects

  • Government ($ 620.000) and 80.000 in objects

  • All other beings ($ 100.000) and 300.000 in objects

The example on the government bonds then follows with:

For example, a bondholder invests \$ 20.000 (called face value) into a 10-year government bond with a 10% annual coupon; the government would pay the bondholder 10% of the \$ 20,000 each year. At the maturity date the government would give back the original \$ 20,000.

From what I understand that after 1 year, the total amount of currency then is:

  • Central Bank ($ 282.000) and 220.000 in objects

  • Government ($ 618.000) and 80.000 in objects

  • All other beings ($ 100.000) and 300.000 in objects

and after 10 years of paying 10% interest, the government also pays off the debt, leading to:

  • Central Bank ($ 300.000+20.000 = 320.000) and 200.000 in objects

  • Government ($ 580.000) and 100.000 in objects

  • All other beings ($ 100.000) and 300.000 in objects

Notes

Even if the government gives out "apples worth \$ 10/kg" and sells it to the central bank for "\$ 20/kg", the central bank would only have a limited amount of money that they can spend on the apples, which would not increase the total amount of money. Since that is contradictory with the presented narratives/comparison to "money printing", I wondered: is the central bank able to "go in debt indefinitely"?.

Question

Based on what I have read I think I am forgetting something, or am misinterpreting this meaning, because otherwise, I do not see where the "extra money" comes from.

Where does the extra money come from in the above example of "quantitative easing"?/What is the mistake in this interpretation?