Quantitative easing (QE)
Often viewed as printing more money, but now done so
electronically.
QE has been used by central banks in Japan, USA, UK (Bank of
England) and now the Euro-zone (European Central Bank).
It is an attempt to avoid deflation by increasing the
QUANTITY of money MONEY SUPPLIED in the economy via the banking system. If
successful it should result in CREDIT EASING i.e. banks being more willing to
provide loans (credit) to consumers and firms for Investment – thus shifting
out AD and achieveing demand pull inflation.
There is a fear that this printing of money’ may result in
the hyperinflation of Gerany in the 1920’s. However QE can be and has been
stopped in the USa and can also be reversed – i.e central banks call in money,
thus reducing the money supply, by selling Government bonds for cash that they
then remove from the economy. In the past they would burn these notes but now
disintegrate them – there was a good film made about this called ‘Hot Money’
which you can watch here if you have the time..
Short 5 min intro - https://www.youtube.com/watch?v=ctzmncGGUhk
Full film - https://www.youtube.com/watch?v=onYfywFF_MA
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