Double-edged sword of modern alchemy: Quantitative Easing in focus

[: MMT (Modern Monetary Theory) was a controversial theory, QE was a giant, real-world experiment that started with a bang and has since become a fixture of global finance.

- by C.A. Saliya

It's the central bank's version of a superhero arriving to save the day when all else has failed.

A New Era of Money Creation

The 21st century has been marked by crises that shook economies across the globe—the 2008 Global Financial Crisis and the COVID-19 pandemic being the most notable. To fight back, central banks turned to an extraordinary tool: Quantitative Easing (QE).

Although often called “money printing,” QE isn’t about running printing presses. Instead, central banks create new digital money in their accounts and use it to buy government bonds and other financial assets. This injects cash into the banking system, lowers interest rates, and aims to revive economic activity.

Then What About That Rs. 2000 Note?

A hot topic in recent months has been the special Rs. 2000 note printed by the Central Bank of Sri Lanka (CBSL), carrying the signature of President Anura Kumara Dissanayaka.

Many people quickly asked: “Is this another round of money printing?”

The truth is more symbolic than economic. Issuing a higher denomination note does not automatically increase money supply—it simply replaces or reorganizes existing currency in circulation. The Rs. 2000.00 note was largely a commemorative and administrative move.

The real danger lies not in producing a new note but in unchecked expansion of digital money to finance government deficits. That’s what caused Sri Lanka's past inflation spiral, not the physical design of currency.

A new note doesn’t reflect money printing. What matters is whether the central bank is responsibly managing overall monetary policy.

From 2008 to 2022, the U.S. Federal Reserve's balance sheet exploded from less than $1 trillion to almost $9 trillion—an ocean of newly created dollars flowing into the system.