A possible reason that quantitative easing isn't very inflationary
I was thinking about MF Global's odd (and unfortunate) repo-to-maturity trade, and concluded that one of the developments is that government bonds are effectively money.
In the not-so-distant past, large banks loaned each other money as loans, but the current trend is to post high-grade bonds as collateral. More formally, it's a sale with an associated repurchase, which mostly works out as a loan, but is much simpler in bankruptcy.
So, in practice, financial entities (banks and so on) can get money for these bonds very easily. So easily, that they effectively are money. (Except when they suddenly aren't, as in Greek bonds.)
In such an environment, a central bank can't effectively increase the money supply by buying government bonds, because as a first approximation, they're just trading money for money. The inflationary effects now mostly happen when the money is borrowed, not when the central bankers buy the debt.
In the not-so-distant past, large banks loaned each other money as loans, but the current trend is to post high-grade bonds as collateral. More formally, it's a sale with an associated repurchase, which mostly works out as a loan, but is much simpler in bankruptcy.
So, in practice, financial entities (banks and so on) can get money for these bonds very easily. So easily, that they effectively are money. (Except when they suddenly aren't, as in Greek bonds.)
In such an environment, a central bank can't effectively increase the money supply by buying government bonds, because as a first approximation, they're just trading money for money. The inflationary effects now mostly happen when the money is borrowed, not when the central bankers buy the debt.