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Q&A Correction – “Funding” Securities with Reserves

I was reading this piece by Sober Look and realized that my response to part of the Q&A was wrong.  Someone asked about the Fed “funding” securities purchases with reserves as referenced by this piece at Sober Look.  I must have misinterpreted the piece to mean that the Fed was “funding” the deficit by using reserve balances.  I misread the statement and was likely part of the “misinformation” that Walter refers to.  Sorry about that.

Of course, the Fed “funds” its QE purchases by crediting banks with reserve balances ex-nihilo.  I would, as always, be very clear that QE results in no change in private sector net financial assets so while the Fed changed the composition of outstanding private assets, it does not change the quantity of private sector net financial assets.  Important distinction when referring to QE as “money printing” and such….

Walter has a good clarification here on his post here.

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