From the course: Economic Tips for Everyone
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Quantiative easing
- Historically, central banks have influenced economic activity and inflation by targeting interest rates. But after the great recession from 2007 to 2009, the Fed and other central banks took a more aggressive policy stance. The Fed for example, started buying mortgage backed securities and treasuries in order to push those interest rates lower and encourage economic growth. The Fed did this by expanding its balance sheet and engaging in something called Quantitative Easing or QE. Essentially, central banks just said they had more money to buy assets in order to keep interest rates low and support growth. But where did the money come from? In truth, the central banks essentially pulled it out of thin air. The money didn't come from the government, public companies, private companies, or individuals. The central banks just said they had it and went shopping. After creating this money, central banks became more creative…
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