Over at twitter Ive been seeking yet more help on quantitative easing…I think Ive got it. Please feel free to correct me. A central bank - e.g. the Bank of England or the European Central Bank prints money. (really its electronic). They use this to buy bonds. Bonds are chunks of money or debts that e.g. the BoE or ECB had previously sold to the banks. So what is happening with QE is that government banks are inventing money to buy back debts that had already sold to the major banks. Or in essence, QE is giving money to banks. In theory, this should help money circulate. Banks having more money is supposed to be good for capitalism because it will make banks happier to lend than they were when they discovered that they had run up trillions in debts of their own lending to people who couldnt pay it back. This should, say the wonks, make lending cheap and this will help new business. Thats the theory. ((I think)
Posted on: Thu, 22 Jan 2015 10:36:01 +0000
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