Bernanke: We’re Creating New Money, But Not Literally Printing It

Bernanke Admits To Congress: We Are Printing Money, Just 'Not Literally' (Forbes

In his semi-annual testimony before the House Committee on Financial Services, Fed Chairman Ben Bernanke was very clear about how the central bank engages in quantitative easing.  We are printing money, just not literally, the Chairman told policymakers, while contradicting himself regarding recent record highs in stock markets, first attributing them both to the strength of the economy and the impacts of monetary policy.  The market didn’t seem to care, rallying tepidly upon the release of the prepared remarks and remaining range-bound through most of the session.

“Where does the Fed get the money to buy [assets],” Congressman Keith Rothfus asked the Chairman.  “Do you create the reserves,” he queried in a follow up, receiving a simple “yes” from Bernanke.  And finally, the money shot: are you printing money? “Not literally,” the Fed Chairman surprisingly responded.