Quantitative easing

Quantitative easing is a euphemism for an inflationary strategy of monetary policy pursued by central banks. The bank adds money to its balance sheet ex nihilo (out of nothing), and uses the new money to purchase government securities, thus increasing bank reserves, raising the prices of government securities, and lowering their interest rates. It is equivalent to simply printing additional legal tender.

In 2010, the Federal Reserve purchased $600 billion in government securities using this method.

Links

 * The Downside of Monetary Easing by William F. Ford, PhD, and Polina Vlasenko, PhD, July 2011