Notes about Quantitative Easing and Fractional Reserve Banking

I remember in 2014, Quantitative Easing 3 ended. I'm interested in economics but I have a very limited understanding of it. Of the topics available, I'm very interested in inflation. To my understanding, inflation doesn't mean the increase of prices. Inflation is the increase of a nation's money supply. An increase to a nation's money supply eventually leads to an increase in prices.

Quantitative Easing 3 ended in 2014 however prices are still rising. We are still feeling the effects of inflation. I was wondering why this was happening. If quantitative easing is just a way for the government to increase the money supply, then ending the quantitative easing program would stop increasing the nation's money supply and prices would eventually stabilize. If quantitative easing ends, and inflation is still growing, that would mean that the money supply is still increasing.

I remembered an old video that explained our monetary system. I'll try to find it and link to it later. Because of fractional reserve banking, every time money is created an equal amount of debt is created. The problem is that every time debt is created, interest is owed on that debt. The money needed to pay off that interest never exists. The only way to pay off the interest on the initial debt is to create more money, and when that happens, more interest is created. It is for this reason that a loaf of bread costed only 20 cents in the early part of this century while it costs a dollar or two dollars today.

This gives me the explanation why inflation is a perpetual problem.

Now some notes about quantitative easing. It is a term I've heard for several years but I never really took the 10 minutes to look up information or details about each quantitative easing program. Particularly, when did these programs start and end and how much money was created in each program. I've linked the wikipedia article here.

Quantitative Easing 1 started in November 2008 and ended in June 2010. Before the recession, the Federal Reserve held 750 billion dollars in treasury notes. The Federal Reserve started buying mortgage backed securities and by June 2010, the Federal Reserve held 2.1 trillion dollars in treasury notes and mortgage backed securities. If I understand this correctly, the Federal Reserve added a total of 1.35 trillion dollars to the United States economy during that time period.

5 months passed until Quantitative Easing 2 started.

Quantitative Easing 2 started in November 2010 and ended sometime during the second quarter of 2011 (sometime in between April to June 2011). During this time period, the Federal Reserve bought 600 billion dollars of treasury securities.

More than a year passed until Quantitative Easing 3 started.

Quantitative Easing 3 started in September 2012 and ended in October 2014. Because of the length of time it lasted, it was referred to as QE infinity. The wikipedia article doesn't give an amount of how much money was added by Quantitative Easing 3 but at the end of Quantative Easing 3, the Federal Reserve held 4.5 trillion dollars of assets.

These are the notes I've collected about our Quantitative Easing programs.