Thread by @SahilBloom

1/ Money Printing 101

By now, we have all seen the “money printer go brrrr” meme and have heard about the money printing exploits of central banks.

But what is money printing and how does it work? Hint: it rarely involves a physical money printer.

Here’s Money Printing 101!

2/ In the digital age, where money is more often just numbers on a screen vs. true cash tender, Central Banks generally “print” money (i.e. increase money supply) in one of two primary ways.

1️⃣ - Debt Monetization
2️⃣ - Quantitative Easing

Let’s hit the basics of each one.

3/ “Debt Monetization” is just a fancy way of referring to the conversion of debt into money - think of it as you “money-tize” the debt.

The government issues a new bond, the Central Bank buys it.

This gives the government new money supply to finance deficit spending.

4/ “Quantitative Easing” is just a fancy way of referring to the Central Bank buying financial assets from non-government entities in the open market.

When the Central Bank buys, this has the effect of increasing money supply, as it gives money to the sellers of these assets.

5/ So while both Debt Monetization and Quantitative Easing increase money supply, neither one of them involves a physical money printer going brrrr.

More accurately, they print money digitally by buying assets from sellers.

So that’s Money Printing 101. I hope it was helpful!