What is quantitative easing?
In: Economics
It’s when the central bank greatly increases the number of assets it buys off the market in order to inject liquidity into the economy. It works by the central banking buying up billions or trillions of bonds and mortgage backed securities. The investor or bank has sold the bond on the market like they would any other time, and the central bank now owns it. As the bond is paid off, the bank effectively destroys that money.
It is not a bailout. It is not a loan. The central bank creates the money it uses to buy the. It’s not as inflationary as you may hear because almost just as much money is destroyed once the bonds mature. The purpose is to increase the amount of available cash that investors and banks can then, hopefully, reinvest in the economy. By not doing this, a downturn may become a recession as people and businesses struggle to get loans to restart the economy.
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