Bro, take it quantitative ease-y. ✌🏼💲 It's not that deep. Quantitative easing sounds like something from that old trig class we all failed, but it's actually a pretty simple concept! 💡
Also known as "QE" for short, quantitative easing is a slick tactic used by Big Banks to help our good pal The Economy get back to normal. 😅 In this handy dandy guide, we'll take you through all the basics.
Here’s Five Fast Facts on quantitative easing:
- 🛍️ I'll Take Every Security For Everything, Alex - Quantitative easing is a monetary policy in which a central bank (like The Fed) buys securities from the stock market to lower interest rates and increase the country's money supply. They'll usually buy securities like government bonds and mortgage-backed financial instruments.
- 🎩 For My Next Trick…- The QE rabbit gets pulled out of the hat when interest rates are around zero and economic growth is stalled. By buying up securities, the money supply increases, which then lowers interest rates. This helps banks lend to customers with easier terms. In other words, it's easier to get a mortgage or personal loan.
- 💰 Spending Spree - During COVID, the Fed used QE to buy up a ginormous amount of US Treasury-backed securities. In fact, DJ Feddy Fed held 56% of them through the first quarter of 2021.
- 🅰️➕ Great Job! - When QE does what it's supposed to do, the increased money supply lowers interest rates, encourages lending, and gives the economy a boost. It also boosts stock prices, making investors happy AF.
- 🚮 QE Ain't For Me - When quantitative easing goes on for too long, it can cause crazy town levels of inflation without growth, AKA "stagflation". It also lowers the value of the dollar and hurts savers who don't have money in the stock market. This statement was brought to you by The Anti QE Gang.
🔥Bottom line: To sum it all up, the Fed pulls the QE card to jazz up the economy and beef up the country's money supply. While it can make things pretty hunky dory, it can also have a negative impact when it stays past its bedtime. Want more info on securities? Peep this article on mutual funds. Oh, and get your assets in gear by clicking here.
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