Economics explainer: What is Quantitative Easing?

in the midst of the financial crisis policymakers began to look for quick ways to stabilize the world economy amid two meltdown one of the main responses that emerged in the United Kingdom and the United States was quantitative easing this is the process by which central banks like the Bank of England create money to buy financial assets QE is sometimes known as money printing but in reality no hard cash is actually created and most of us will never see it instead a central bank is able to digitally create money which is then deployed to purchase things like government debt in the form of bonds this is what happened to the UK to the tune of 375 billion pounds from 2009 QE helps lower the income investors can get from these so-called safe assets in doing so it makes them less attractive encouraging the same investors to go out and put their money into riskier things in the search of better returns on their investment one class of such assets is shares and since QE came into the world global stock markets have been on a healthy bull run the theory also goes that the institutions that sell these safe bonds also put their money elsewhere like lending to people and companies and thus helping boost economic activity when the economy has begun to recover the central bank then sells its assets and sterilizes the cash it receives from the sales so overall no additional money remains in the system

Channel: The Telegraph

Views: 99,225

Keywords: telegraph, Quantitative Easing, Economics (Field Of Study), explainer

Id: blSnLEZe-sI

Length: 1min 44sec (104 seconds)

Published: Thu Feb 12 2015