"Money Printing"... regardless of whomever is behind it and for whatever reason... is INFLATIONARY!!! No excuses.
Such a sweeping statement is of course not true, but not surprising either when one considers how ignorant the general population is regarding the source and control of our money...
All deficits are covered first by money printing, and then the new money created and spent into the private sector economy returns to the government when it is converted, to the penny, to Treasury bonds. Later the Fed will use open market operations, via the secondary bond market, to Buy, or Sell, Bonds as it deems necessary to implement its monetary policy.
When the Fed Buys interest paying money in the form of bonds (which
are not a part of the money supply) the private sector sees this as an increase in bank reserves; hence as an increase in the money supply. On the other hand, when the Fed Sells bonds, bank reserves (which
are part of the money supply) are converted to bonds.
The net of these events, beginning with printing of new money and ending with the new money's removal from the money supply when it is converted to bonds, does not cause inflation. Bonds do however represent potential for future inflation to the extent that the aggregate deficit grows faster than aggregate economic growth. Most inflation nowadays is caused by externalities having to do with supply and demand of goods and services as we experienced in the wake of the recent Covid Pandemic..
Since the largest component, by far, of the money supply is credit, the Fed has only weak secondary control of the money supply via interest rates which only significantly affect the demand for credit at the margins. Congress has by far the most powerful tools affecting the money supply, but seldom exercises them, because were they to, the result would be unpopular. Is it surprising therefore that the necessary is often put off until there is a crisis?
Incidentally, it is Congress, via its setting of the level of taxation and spending, that determines the size of the deficit. Hence it is Congress that prints new money; not the Fed, which only prints new money in a trivial sense! Contrary to popular belief, the Fed has no say in the amount to be printed. The Fed is Congress's agent just as your home computer's printer is your agent. The Fed does, however, determine what form a minor part of our private sector money shall take, i.e., shall it be in the form of interest-paying* bank reserves or in the form of interest-paying bonds. The Fed adjusts the ratio of reserves to bonds via open market operations according to its monetary policy.
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*Previously the Fed did not pay interest on reserves. The Powell Fed joined other Central Banks (Canada, Australia, etc.) in the simpler way they controlled the Central Bank funds rate. This occurred in recognition that it was not necessary to dictate a specific reserve requirement.
