Speaking of QE, I believe that many people don’t know the name very well. Perhaps the one who knows the most is also a quality engineer, but in fact this QE has other meanings, which is quantitative easing. There may also be some people who are not very clear about quantitative easing. After all, the term is very unfamiliar. Many people who don’t know really don’t know what it means. Then let’s take a look at what QE means. The impact of quantitative easing QE policy.
What does QE mean?
The so-called QE sounds very tall. To put it bluntly, it means printing money. The quantification refers to the expansion of a certain amount of currency issuance. I believe this explanation is not difficult to understand for many people, and easing refers to the reduction of bank reserves. The pressure to inject capital.
To put it simply, it means that after the central bank has implemented the zero interest rate policy, or after the implementation of the near zero interest rate policy, it will increase the supply of base money by purchasing some bonds such as national debt, thereby achieving the intervention of injecting large amounts of liquid funds into the market. purpose. Through this kind of intervention to encourage spending and borrowing, it can be reduced to indirect printing of banknotes, which is what we call printing money.
Quantitative Easing is short for QE, which is affectionately called “water release” in our country, which can be understood as indirect printing of money. Specifically, the Federal Reserve purchases Treasury bonds and other medium- and long-term bonds from some other financial institutions in the market, such as buying these medium- and long-term bonds from banks, so that banks have more money and can provide more sufficient funds to the market. Liquidity is equivalent to putting money into the market in disguise. To better understand quantitative easing, we have to grasp it from two aspects: one is quantitative and the other is easing.
Easy refers to loose monetary policy, which puts liquidity into the market. This is actually well understood. The key lies in why it is called “quantitative”. This is mainly related to the way it implements easing.
Normally, the Fed wants to implement loose monetary policy, the most direct means is to lower interest rates, that is, cut interest rates. However, in some cases, when the interest rate drops to 0 or hovering around 0, the simple rate cut will not work, because there is no interest rate to be lowered. At this time, some special stimulus measures are needed. The most typical one is 2008. And the current situation, and therefore QE is regarded as an unconventional policy tool in extraordinary times.
The Federal Reserve buys Treasury bonds from banks and other financial institutions, and stuffs the money into the hands of the banks. The banks can take the money and provide a steady stream of loans to the market at low prices, so that the entire market is immersed in a rich monetary environment.
Because the amount of bonds purchased by the Fed can be controlled, for example, the first round of QE in 2008 was mainly to send liquidity to Fannie Mae and Freddie Mac in the United States to solve the liquidity crisis of these two US “state-owned enterprises.” That round of QE purchased a total of $1.72 trillion in assets.
This is the meaning of quantification, which means that this way of releasing liquidity can be measured. This is the difference between QE and interest rate cuts.
Understand what does QE mean? The impact of the quantitative easing QE policy is not difficult to understand, because most of the quantitative easing policies are related to government bonds, so this amount is generally relatively large, and the cycle is long, so there is very little use of currency When easing policies, unless conventional tools such as interest rates are no longer effective, then monetary authorities may consider using QE policies.
The impact of quantitative easing
Although I understand what QE means? The impact of the quantitative easing QE policy has many aspects. For example, the quantitative easing policy can raise a large amount of seigniorage for the country, and it also provides a very important support for the country’s fiscal expenditure. Finally, it may lead to global prices. The rise has caused a substantial depreciation of the country’s currency, which has led to a substantial decline in the value of the national bond market.
In fact, the quantitative easing policy has been implemented many times, but the previous concept is not the same, but fundamentally it is the same, so understanding the meaning and policy impact of this quantitative easing is not too big for many people. The significance of this, after all, wanting to invest in national securities is a relatively long-term matter, and the amount involved is also relatively large, so generally speaking, this policy is not used, that is, the government launched this quantitative easing only after the US economy has repeatedly depressed.