AZnomicsThe $20 Trillion Experiment
Central banks created money from nothing to save the world — and nobody knows the final bill
"Between 2008 and 2022, the world's central banks created more money than in all of prior human history combined."
Quantitative easing — QE — was meant to be a temporary emergency measure after 2008. Central banks would create new money, use it to buy government bonds, push interest rates down, and stimulate lending. It worked. It also became permanent, was used again during COVID at ten times the scale, inflated asset prices enormously, and — when central banks finally tried to reverse it — contributed to the worst inflation in 40 years.
The Fed doesn't literally print money — it creates electronic reserves. It buys Treasury bonds or mortgage-backed securities from banks, crediting their accounts with new money. Banks now have more reserves, interest rates fall, borrowing gets cheaper, businesses invest, people spend. In theory. In practice, the new money mostly inflated asset prices — stocks, bonds, property — because the wealthy own most assets. The rich got richer. The mechanism for helping ordinary people was indirect and slow.
In March 2020, global markets crashed 30% in three weeks. The Fed launched the largest QE programme in history — $120 billion per month. Interest rates went to zero. Other central banks did the same. Asset prices went vertical. The S&P 500 recovered its all-time high in five months — the fastest recovery ever. Meme stocks, crypto, NFTs, SPACs — every speculative asset exploded. The money had to go somewhere.
By 2021, US inflation was running at 7% — the highest since 1981. The Fed had been saying it was "transitory." It was not transitory. In 2022, the Fed raised rates from 0% to 5.25% in 18 months — the fastest tightening cycle in 40 years. Mortgage rates doubled. Tech stocks fell 70%. Crypto lost $2 trillion. The cost of the 14-year QE experiment was being paid — in inflation, in market crashes, and in ordinary people's grocery bills.
QE demonstrated that central banks can prevent financial collapse. It also showed that money creation without productivity growth eventually produces inflation. The question economists are still arguing about: was the inflation a result of QE, COVID supply shocks, or both? The answer matters enormously for what central banks should do next time.