Economics terms are thrown about by those in-the-know all too regularly. Frankly, its baffling for those of us without expert knowledge in the subject, and “put simply” explanations are infrequent to say the least. #LetsTalkPolitics and challenge this.
- Quantitative Easing (QE) is policy used by centralized, government banks to give the economy a push when its usual monetary policy has stopped working.
- A central bank will then buy financial assets (often referred to as bonds) from commercial banks and companies.
- This raises the prices of bonds and therefore prevents deflation. The Bank of England states that stable levels of low inflation are vital to a healthy economy.
- Sometimes, QE can work to well. This leads too unsustainable, unstable levels of inflation – which can lead to the breakdown of financial systems in extreme circumstances.
- The aim of democratic governments is (generally) to keep inflation stable, whilst increasing the money in the pockets of its citizens. The best way to do this, whether via tax breaks or wage increases, is up for debate.