Sunday, July 12, 2009

What is Quantitative Easing and Why is Everyone Talking About It?

Quantitative easing is a monetary policy central banks (like the Fed) use to manage the money supply and stimulate the economy when interest rates are close to zero. It is a much more direct form of monetary policy as opposed to the more indirect form used during periods of more "normal" interest rates.

Here is a link to pamphlet published by Bank of England explaining Quantitative Easing. The pamphlet is well written and very understandable.

If you want a more detailed discussion try Wikipedia. This is also an excellent discussion and it covers both the concept, process, and risks. One of the current problems in the US is that the banks are just sitting on the money to cushion the blow of additional losses.

No comments:

Post a Comment