That process is repeated by the next person who gets some of proceeds of the money that the government spent, and then the next person does the same, and each time some tax is paid.
The result is that when the government creates money to spend it can pretty much guarantee that in a well controlled economy it will get its money back in tax. And that multiplier effect is what gives that money its value. This video explains that process.
Which doesn’t really explain QE now, does it?
So, the money equation:
MV = PQ
This is not arguable, it is a definition. The amount of money we have times the number of times we use the money equals the amount of money used times the number of times it is used. It’s not just a definition it’s a tautology.
So, when V – the multiplier – falls what happens to the value of money? That’s right, we get deflation, the thing we fight by printing more money with QE. What happens when V increases? We get inflation which we fight by reducing the multiplier again (say, raising interest rates) or reducing the amount of money by open market operations like selling gilts and so on, running a budget surplus perhaps. Even, increasing tax in order to reduce that amount of money through that budget surplus.
Deflation is, of course, a rise in the value of money, inflation is a reduction of it. An increase in the multiplier reduces the value of money, a decrease in it increases.
The man understands monetary theory so well that he’s got it inverted.