Can somebody please explain to me what quantitative easing is in simple terms?
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The government issues bonds to borrow money. A bond is a specific type of loan, which can be traded from one person to another. Under normal circumstances, the yield on those bonds is no different from a bond issued by any other institution: A business, a city, whatever.
However, QE2 is a system whereby the Federal Reserve uses money drawn from the U.S. Treasury (thin air, in actuality, since the Treasury can print dollars) to buy those bonds. So, in effect, the government is printing money and stuffing it into the pockets of people who are holding government debt, on the undertaking that they’ll take that money and invest it elsewhere.
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