What is Monetary Quantitative Easing?

Quantitative easing is a monetary policy in which banks raise money through open market operations, which can be seen as "creating a specified amount of money out of nothing", and is also simplified as indirectly printing more money. Its operation is that the bank purchases through open market operations, etc., so that the funds in the settlement account opened by the bank in the central bank will increase, and new liquidity will be injected into the banking system.

Quantitative easing mainly refers to the intervention method in which banks purchase medium and long-term bonds such as treasury bonds to increase the supply of base money and inject a large amount of liquidity into the market after the implementation of the zero interest rate or near-zero interest rate policy, which is also simplified as indirect money printing.

The ** bonds involved in the quantitative easing policy are not only large in amount, but also have a long period. In general, monetary authorities will only resort to such extremes if conventional tools such as interest rates are no longer effective.

The so-called monetary quantitative easing refers to the intervention method in which the bank injects a large amount of liquidity into the market by purchasing medium and long-term bonds such as treasury bonds to increase the supply of base money and inject a large amount of liquidity into the market after the implementation of the zero interest rate or near-zero interest rate policy.

Unlike traditional tools such as interest rate leverage, QE is seen as an unconventional tool.

Between 2001 and 2006, under the long-term problem of deflation, the Bank of Japan** lowered its policy rate to zero and made a quantitative purchase of medium- and long-term government bonds. The ultimate intention of these policies is to further increase the money supply, reduce medium- and long-term market interest rates, and avoid intensifying deflationary expectations by expanding the bank's own balance sheet, so as to promote the recovery of the credit market and prevent the economy from continuing to deteriorate.

Since the international financial crisis, the demand of major economies has continued to decline, in response to the crisis and economic recession, the central banks of major economies have sharply lowered the benchmark interest rate, some of which have reached near zero, but the risk premium in the financial market is still high, the credit market is seriously tightened, and the usual monetary policy transmission mechanism based on short-term interest rates is not smooth. Under this special circumstance, the unconventional monetary policy characterized by quantitative easing has become one of the necessary means for major banks to resist deflation and stabilize the economy. In addition to the European Central Bank, major central banks have taken the following measures at present"Quantitative easing"and other unconventional monetary policy measures.

The essence of quantitative easing monetary policy is to activate the money printing machine to inject liquidity into the market when it is divorced from the needs of the real economy.

In the case of low market confidence and shrinking investment, the liquidity released to the market by the quantitative easing monetary policy will not lead to inflation, but once the economy improves and investment confidence recovers, the excessive release of liquidity may turn into inflation.

Especially for the United States, since the dollar is the world's reserve currency, the pricing of the world's major commodities is based on the dollar, and the Fed's implementation of quantitative easing monetary policy will lead to a sharp depreciation of the dollar, which will lead to a new round of resources **** and bury the hidden danger of global inflation.

Monetary policy refers to the general term for the various policies, policies and measures adopted by banks to control and regulate the amount of money and credit in order to achieve their specific economic goals. The essence of monetary policy is that the state adopts different policy orientations such as "tight", "loose" or "medium" according to the economic development in different periods.

Quantitative easing mainly refers to the central bank's purchase of medium and long-term bonds such as treasury bonds to increase the supply of base money and inject a large amount of liquidity into the market to encourage spending and borrowing by purchasing medium and long-term bonds such as government bonds after implementing a zero interest rate or near-zero interest rate policy. It is also simply described as indirect overprinting.

The amount of government bonds involved in quantitative easing is not only huge, but also long-term. In general, monetary authorities resort to such extremes only when conventional instruments such as interest rates are no longer effective.

The goal of quantitative regulation is to lock in long-term low interest rates, and central banks continue to inject liquidity into the banking system and inject large amounts of money into the market. In other words, under quantitative easing, the monetary policy implemented by the central bank on the economic hail is not a fine-tuning, but a fierce medicine.

Quantitative easing mainly refers to the central bank's purchase of medium- and long-term prudent bonds such as treasury bonds after the implementation of a zero-interest rate or near-zero interest rate policy, increasing the supply of base money, and injecting a large amount of liquidity into the market to encourage spending and borrowing. It is also simply described as indirect overprinting.

The amount of government bonds involved in quantitative easing is not only huge, but also long-term. Generally speaking, such extremes are only taken by the monetary liberalization authorities when conventional instruments such as interest rates are no longer effective.

The goal of quantitative regulation is to lock in low interest rates for a long time, and central banks continue to inject liquidity into the banking system and put large amounts of money into the market. In other words, under quantitative easing, the central bank's implementation of Qi Da's monetary policy on the economy is not a fine-tuning, but a fierce medicine.

The "quantitative" in "quantitative easing" refers to the amount of money that will be created in a specified amount, while "easing" refers to reducing the financial pressure on banks. Banks use the money they create out of thin air to buy bonds in the open market, lend money to deposit-taking institutions, buy assets from banks, etc. All of this has helped to lower the yield of ** bonds and lower the interbank overnight rate, which has led to a large number of assets that can only earn very low interest rates, and the central hail is expected to make banks more willing to lend to earn returns to ease the financial pressure on the market.

Although quantitative easing monetary policy is conducive to curbing the deterioration of deflationary expectations to a certain extent, it has not played an obvious role in reducing market interest rates and promoting the recovery of the credit supply and sales market, and may bring certain risks to the global economic development in the later stage.

In the first case, if QE is successful, increasing credit**, avoiding deflation, and returning to healthy economic growth, then in general** will outperform bonds.

In the second case, if the quantitative easing policy is excessively implemented, resulting in too much money and inflation returns, then real assets such as **, commodities and real estate may perform better.

Third, if QE fails to produce results and the economy falls into deflation, then traditional ** bonds and other fixed income instruments will be more attractive.

FYI.