When a country's central bank buys that same country's government securities, is this exactly equivalent to printing money?
There seems to be no agreement on this.
Is the Federal Reserve printing money in order to buy Treasury securities?
central banks, by printing money, can help governments spend more than they collect in taxes. The difference (the deficit) can be bridged by borrowing not from private savers but from the central bank, primarily through the central bank’s purchase of government securities. Public debt increases, but if the securities are held by the central bank, any interest paid to it goes back to the government, which receives its profits even in countries where the government formally does not own the central bank. In other words, the portion of public debt held by the central bank is not to be regarded as real debt, at least not in the immediate future. This is essentially what has happened to varying degrees in many advanced countries, which have continued to run sizable deficits since 2008.
Who is correct? (Or, why the seeming disagreement?)
Concrete example: Say John is hired to mow the White House lawn for \$100. What then is the difference between the following two scenarios?
- The US Treasury prints a \$100 note, then uses it to pay John.
- The US Treasury issues a \$100 bond that the Fed buys, then uses the \$100 deposited in its account to pay John.