Debunking Economics - the podcast QE, QT and the control of central banks
Oct 1, 2025
Steve Keen, a critic of neoclassical economics and author of Debunking Economics, explains why central banks bought massive bond volumes during COVID and what risks arise when they try to sell them. He discusses how QE exposed banking model flaws, how QT can drain money and deflate assets, and whether central banks should coordinate with treasuries or act independently.
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QE's Asset Inflation Mechanism
- QE swaps government bonds for bank reserves but doesn't directly create lasting broad money in the real economy.
- It primarily inflates asset prices because recipients initially use funds to buy financial assets.
Private Sales Can Reverse Government Money
- Banks selling government bonds to non-banks destroys money created by fiscal deficits.
- Central bank bond purchases can restore that money, so QE can reverse private-sector money destruction.
Personal Bond Purchase Story
- Steve Keen recounts buying Queensland state bonds for $200,000 when he expected falling interest rates.
- He avoided property speculation and still profited, though he jokes he picked the smaller bubble.
