What is quantitative relaxation?

Quantitative release is an economic term describing the steps that can take the country's central bank at the time of economic stress. The central bank controls the amount of available currencies in the country and can make new money through free market operations. Simply put, that is, the central bank creates or prints money from the thin air, albeit indirectly. If this is done to stimulate the economy in the recession, it is known as quantitative relaxation because it seeks to alleviate the economic burden by increasing the amount of currency available.

Most of the world's central banks participated in this practice at once, including the Federal Reserve of the United States, also known as Fed. One of the most common methods of quantitative relaxation used in the US is when the federal reserve system is purchased by state treasury bonds of the Federal Government. It can also be done by lending new money to desperate banks or buying a bank with asset for a new currency or any combination of TRome methods that are known as free market operations.

any of the three techniques have a specific and predictable result, namely a reduction in interest rates. In the case of purchasing government bonds, the revenues of these tools are reduced. If money is lent to banks or are given in exchange for assets, rates that banks charge each other for short-term loans will be reduced, encouraging banks to lend money and increase the offer of money in the economy. When we hear it, he said that the central bank like The Fed has changed its target interest rate, in fact, it means that it is changing the way in which operations in the free market.

In response to the economic abyss, which began at the end of 2008, the federal reserve system began to use quantitative release to solve the situation. The aim of such events with the triggered banking system, without which the economy would have even deeper problems. QuantitativeThe release is ideally reserved for emergency situations, due to the risk of inflation.

Inflation was defined as too much dollars that haunted too little goods. Easy availability of cheap money often converts the road to higher consumer prices as well as loss of personal savings. The reckless central bank policy in some countries has led to hyperinflation, which is simply a very high level of inflation, so high that the value of the currency can change significantly in a single day. Hyperinflation can quickly stop the economy, with a worthless affected currency in this process.