QUANTITATIVE EASING

This is a hotly debated monetary policy that is supposed to stimulate the economy. It allows for the new money to be created in order to buy banks´ assets so that there is more money available for banks to loan to its customers.

The result of this type of monetary operation is the devaluation of the currency, possible increases in inflation and, on the other hand, an increase in the availability and access to credit for consumers and investors.

The United States has passed several quantitative easing measures through history, most notably:

  • For Lehman Brothers in 2008 when most of their toxic assets were eliminated by being bought back by a special government credit extending programme.
  • The injection of 600 billion dollars for the fed in 2010 into “the economy” to buy back government bonds and improve economic activity in the U.S.