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Quantitative easing (QE) is a monetary policy used by some central banks to increase the supply of money by increasing the excess reserves of the banking system, generally through buying of the central government's own bonds to stabilize or raise their prices and thereby lower long-term interest rates. This policy is usually invoked when the normal methods to control the money supply have failed, i.e the bank interest ratediscount rate and/or interbank interest rate are either at, or close to, zero. It has been termed the electronic equivalent of simply printing legal tender.[1]

A central bank implements quantitative easing by first crediting its own account with money it creates ex nihilo ("out of nothing").[2] It then purchases financial assets, including government bondsagency debtmortgage-backed securities and corporate bonds, from banks and other financial institutions in a process referred to as open market operations. The purchases, by way of account deposits, give banks the excess reserves required for them to create new money, and thus hopefully induce a stimulation of the economy, by the process of deposit multiplication from increased lending in the fractional reserve banking system.

Risks include the policy being more effective than intended, spurring hyperinflation, or the risk of not being effective enough, if banks opt simply to sit on the additional cash in order to increase their capital reserves in a climate of increasing defaults in their present loan portfolio.[2]

"Quantitative" refers to the fact that a specific quantity of money is being created; "easing" refers to reducing the pressure on banks.[3] However, another explanation is that the name comes from the Japanese-language expression for "stimulatory monetary policy", which uses the term "easing".[4] Quantitative easing is sometimes colloquially described as "printing money" although in reality the money is simply shifted from member bank dollar deposits to financial instruments.[5] Examples of economies where this policy has been used include Japan during the early 2000s, and the United States, the United Kingdom and the Eurozone during the global financial crisis of 2008–the present, since the programme is suitable for economies where the bank interest rate, discount rate and/or interbank interest rate are either at, or close to, zero.

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review by . November 06, 2010
Export your way out of miseries!
When it comes to innovation, America is a winner. Big time!    When it comes to solving problems, America is a loser. Long Term!      Wall Street, the Feds, the U.S. government... slowly but surely, I'm losing respect for all of them. Granted, I'm not a big timer in any of these, I'm just a world citizen. Looking at it from another perspective, I'm one of those voices around the world where we no longer know what they are doing. We don't even …
Quick Tip by . November 06, 2010
Episode 2 of another nightmare some 2 years ago. 600 billions to the financial market? Whatever for? Been reported all over Asia as America's means of exporting inflation which is counterproductive. Not only does it not benefit U.S., it harms other world economies. Why do you think gold is now close to US$1400 an ounce and oil prices are escalating again?! Low interest rate to induce spending in a recessionary environment? Geez, can't they see that's what Japan did some 2 decades ago …
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