Why money printing does not lead to a debasement of currency

I just read a very interesting blog post by Dali on the debasement of currency caused by all the money printing. 

My initial conclusion back in 2010 at the inception of these printing was the same.. it's going to be as inflationary as in Germany post WW1. However 5 years following the first QE, there's still no inflation..  then I came across some smart economist pointing out that all these extra money is basically absorbed by the bank in increase reserve.. it make sense, if the money printing were to be inflationary - the effect should have been apparent almost immediately.

I put forward an alternate view to why money printing is not inflationary.

An alternate view

Econ 101 taught us printing of money lead to increase supply which will lead to a debasement of the currency.

HOWEVER

- Quantitative easing is merely a form of monetary policy that increases LIQUIDITY in the banking system.

- Liquidity of the banking system is separate and distinct from credit growth and availability. The monetary policy can only influence the PRICE of the lending.

How monetary transmission mechanism work in reality

- Despite the printing of money in the last few years by the treasury, money supply have been relatively stable and inflation in check.

- The main determinant of credit growth is RISK APPETITE: whether banks want to lend and whether companies/consumer want to borrow. Companies are hoarding a record amount of cash.

- According to Bernanke, the objective of QE is to maintain low long term interest rate

 

Bernanke August 2010 speech

- A byproduct of this low rate is a gradual healing of household balance sheet in the US and of the government itself

- Reality is that quantitative easing merely swaps bank reserves for US treasury

Interesting read:

1) http://www.voxeu.org/article/central-bank-reserve-creation-era-negative-money-multipliers
2) http://www.federalreserve.gov/pubs/feds/2010/201041/201041pap.pdf