I know, I know -- this is Wikipedia. But there is a line there in the quantitative easing article that makes even less sense than other political topics at that site:
It should be noted that mortagage-backed securities such as are being purchased as part of the QE3 program are not based on liquid assets, and their purchase [by the Fed] does not entail inflation risks
This makes zero sense to me. But maybe I am missing something.
First, I don't understand why the fact that the assets purchased with the printed money are liquid or not liquid. If anything, I would have assumed that purchasing less liquid assets would have more inflation risk than the other way around. If one puts more currency into the economy, the more currency-like the asset one pulls off the market, ie the more liquid, the less the inflation risk, I would have thought.
Second, while mortgages may not be liquid, mortgage-backed securities are very liquid. If liquidity of the asset matters here, I am not sure why the underlying asset would matter as much as the asset itself being purchased. I mean, by this metric, treasuries are based on a really, really illiquid asset, simply the full faith and credit of the US government.
Third, printing of money would seem to always have inflation risk, no matter what the government is purchasing with the still-wet dollars. (yeah, I know, it's all digital).