'Quantitative Easing refers to the central bank literally creating money out of thin air to stimulate the economy.
The Central bank will print money which in turn it will use to buy government bonds. These bonds are like ‘IOU’ notes which the government promises to pay back including interest. This increases the amount of debt of the country this policy is being implemented in.
The government will now use this new created money to help ease the pressure on banks by lending money to help them or by nationalising parts of them which in turn allows the banks to continue lending. This will hopefully increase spending in the economy.'
Is this an accurate explanation of quantitative easing in layman terms?
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Layman Explanantion of Quantitative Easing watch
- Thread Starter
- 21-03-2009 22:46
- 22-03-2009 11:17
Sounds about right, I think, except there probably won't be any actual physical printing of money - it would just be numbers appearing in a computer.