I’ve been hearing these terms but don’t really understand what they mean, when and why are they used by the government and how exactly they affect prices and general standard of living.
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The value of a dollar today is set primarily by inflation rates and interest rates. Basically with high interest rates and/or inflation rates money is worth less today than it would be tomorrow. If you think of “quantitative” as “access to money”, then easing means it becomes easier to get loans and tightening means it’s harder.
When interest rates are high, people and businesses want to save money because they get a good return, when they’re low you want to spend money because you can borrow from someone else very cheaply. “Easing” is when the government (who controls all currency) drops interest rates so that borrowing money is really cheap, usually done to stimulate spending (aka the economy). Tightening is the opposite and is used to fight inflation by encouraging people to save money.
Some of why inflation is high today is due to 1) a 10 years period of having easy access to money combined with 2) rampant speculation in markets that led to corporations and individuals taking their cheap money then “investing” it vs spending it. That increases the on-paper supply of money which drives up prices of those actually selling goods. Remember, just because Tesla at one point was worth more than Microsoft on paper, doesn’t mean that Tesla today produces more value in goods and services than them.
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