What is quantitative easing? Appropriate examples can be given if conditions permit.

Quantitative easing is a monetary policy, which is operated by the central bank through the open market to improve the money supply. It can be considered as creating a specified amount of money out of nothing, or it can be simply described as indirect printing money. Its operation is that the central bank purchases securities through open market operations, increases the funds of banks in the settlement accounts opened by the central bank, and injects new liquidity into the banking system. "Quantification" in "quantitative easing" refers to creating a specified amount of money, while "easing" refers to reducing the financial pressure on banks. The central bank uses money created out of thin air to buy government bonds in the open market, lend to deposit institutions and buy assets from banks. All these help to reduce the yield of government bonds and the overnight interest rate of banks, so that banks have a large number of assets that can only earn very low interest. The central bank hopes that banks will be more willing to provide loans to earn returns, so as to ease the financial pressure on the market. The Federal Reserve throws out the second round of quantitative easing policy. When the currency is already loose, or the purchased assets will depreciate with inflation (such as national debt), quantitative easing will tend to depreciate. Because quantitative easing may increase the risk of currency depreciation, the government usually introduces quantitative easing measures during deflation. Continued quantitative easing will increase the risk of inflation. Under the partial reserve system, banks keep a certain proportion of deposit reserve, and the rest can be used for loans. With the increase of deposits in the process of quantitative easing, banks can borrow and create more money supply, that is, deposits double. For example, suppose the requirement of deposit reserve is 10%, and the final money supply can be 100000 USD for every100000 USD created by quantitative easing. Quantitative easing provides sufficient liquidity for the local interbank market, greatly reducing the borrowing cost, and ultimately expects all borrowers to benefit to support the overall economic operation. Generally speaking, quantitative easing can support the overall economy and "help to alleviate or curb the impact of the economic downturn." Although described as "printing money on mobile phones", quantitative easing is usually just to adjust computer accounts. To implement quantitative easing, a country must have control over its own currency; Therefore, for example, individual countries in the euro zone cannot unilaterally introduce quantitative easing policies. The central bank can relax monetary policy in two ways: changing the price of money (that is, interest rate) or changing the amount of money. For many years, orthodox monetary policy has been centered on the previous policy leverage. However, when the inflation rate drops and the short-term nominal interest rate approaches zero, in principle, the central bank can implement expansionary monetary policy in the latter way, namely quantitative leverage. It is the real interest rate rather than the nominal interest rate that affects economic activities. If the economy is in deflation, the real interest rate will still be positive even if the nominal interest rate is zero. This is what Japan faced in 2000-the nominal interest rate has dropped to zero, but when the real interest rate is positive, the sluggish money demand is still not enough to make monetary policy effective. This is what we used to call the "liquidity trap". The central bank has three unconventional ways to relax monetary policy. First, the central bank can cultivate the expectation that short-term interest rates will remain low for a long time through communication with the outside world or quantitative easing. In fact, from March 20065438 to March 2006, the main purpose of the quantitative easing policy of the Bank of Japan was this. For another example, in August 2003, the Federal Reserve's Open Market Committee stated in its communique that "adaptive policies will be maintained for a long time" is also an example of this relaxation of monetary commitments. Second, the central bank can expand the size of its balance sheet to affect inflation expectations. Third, the central bank can change the structure of its balance sheet. If investors regard different assets as imperfect substitutes, the central bank's purchase of specific assets will have a significant impact on asset prices. In this regard, the best example is the long-term US Treasury bonds. In theory, the Fed can buy US Treasury bonds on a large scale to curb the rise in yields; This is what the Bank of Japan did during the implementation of quantitative easing. Although the above three quantitative easing methods are different in concept, they can replace each other in operation. Insiders pointed out that this unconventional policy measure, which is almost universal at present, helps to curb the deterioration of deflation expectations to a certain extent, but has no obvious effect on reducing market interest rates and promoting the recovery of credit markets, and may bring certain risks to global economic development in the later period. In the first case, if the quantitative easing policy can take effect successfully, increase credit supply, avoid deflation and restore healthy economic growth, then generally speaking, stocks will outperform bonds. In the second case, if the quantitative easing policy is carried out excessively, resulting in excessive money supply and the recurrence of inflation, then physical assets such as gold, commodities and real estate may perform better. Third, if the quantitative easing policy fails to produce results and the economy falls into deflation, then traditional national debt and other fixed-income instruments will be more attractive. Quantitative easing is likely to bring the consequences of hyperinflation. The central bank injects a lot of liquidity into the economy, which will not lead to a substantial increase in the money supply. However, once the economy recovers, the money multiplier may rise rapidly, and the liquidity that has been injected into the economic system will soar under the action of the money multiplier, and excess liquidity will pose a big problem in the short term. Quantitative easing policy not only reduces the borrowing costs of banks, but also reduces the borrowing costs of enterprises and individuals. Now the world is hot and cold, and governments all over the world are implementing ultra-low interest rates, with the original intention of hoping for a rapid economic recovery. However, the result backfired. Some countries, such as the United States, should have entered the real economy with quantitative easing money flowing into the stock market. When the economic fundamentals are not good at all, the stock market rises sharply. The Dow Jones Industrial Average once broke through 1 1000, and reached 165438 on June 18. Zhou Xiaochuan, governor of the central bank, said that reducing dependence on external demand and expanding domestic demand, especially on domestic consumption and service industry development, are traditional Chinese medicine methods to deal with China's exchange rate problem, and cannot play a particularly important role by relying on a single measure. He believes that the quantitative easing policy of the United States is not necessarily the best choice from a global perspective, and there may be other side effects. He also said that the macroeconomic balance has been maintained, but it is impossible to completely eliminate the arbitrage speculation brought by the carry exchange rate. Zhou Xiaochuan said that there are two ways to deal with China's exchange rate problem: traditional Chinese medicine and western medicine. Western medicine treatment is based on theory and experience, and taking medicine will soon be effective. The efficacy of Chinese medicine will be slower. Reducing dependence on external demand and expanding domestic demand, especially for the development of domestic consumption and service industry, shows that it is a bit like traditional Chinese medicine, but it is several drugs. He believes that exchange rate is an important policy to solve the imbalance of trade items; Expanding domestic demand is also a very important aspect. To expand domestic demand, it is necessary to solve the problems such as the increase of labor wages and the further reflection of energy and resource prices on supply and demand and environmental costs. With the realization of environmental cost, the real cost of manufacturing industry has also been reflected; There is also the grasp of export tax rebate and other policies. In the past, when adjusting the balance of international payments, China paid attention to the adjustment of export tax rebate, but later it was found that there were many side effects, which conflicted with the principle of international fairness to some extent. Zhou Xiaochuan said that the metaphor of traditional Chinese medicine has three meanings, one is radical or gradual, the other is about dynamic adjustment and trial and error on the basis of feedback, and the third is to play a particularly important role without relying on a single measure. Regarding the impact of the Federal Reserve's quantitative easing policy on China, Zhou Xiaochuan said that the People's Bank of China has communicated with the Federal Reserve on several international occasions. Zhou Xiaochuan said that the new round of quantitative easing policy is conducive to creating jobs in the United States and maintaining low inflation in the United States. If the economic recovery in the United States is weak, the unemployment rate is relatively high and the inflation rate is low, it is understandable to adopt a moderately loose policy when the policy interest rate in the United States is low. But the problem is that the US dollar is an international currency and a reserve currency, which is not only used for reserve purposes, but also used in a large number of global commodity transactions, investments and financial market transactions. Therefore, a policy may be the right choice for the United States, but it may not be the best choice from a global perspective, and there may be other side effects. He emphasized that China's current foreign exchange system manages capital projects, and the inflow of abnormal capital projects either cannot enter or detours. There are management measures to control the bypass. Another measure is to hedge the total amount. If short-term investment funds come in, put them in the pool instead of entering the whole real economy, and let them flow out of the pool after they are retired, which can reduce the impact of abnormal capital flow on China's economy on a macro level. "This will also cause another problem. Capital will come in and go out. In this process, opportunities will be found, such as interest rate differences, currency exchange rate trends, etc., and there may be speculative gains. " Zhou Xiaochuan said that for this problem, on the one hand, we must see the importance of total control, on the other hand, we must also see that there are arbitrage opportunities in this world, and there will always be people doing these things, which is almost impossible to prevent. Zhou Xiaochuan emphasized that macroeconomic balance should be maintained and speculation through arbitrage and other opportunities should be prevented as much as possible, but this cannot be completely eliminated. On the whole, the global impact of quantitative easing in the United States needs to be viewed from multiple angles. For example, when it is not feasible to increase the money supply by cutting interest rates, the central bank may introduce quantitative easing measures; It usually occurs when the interest rate is close to zero. Among them, the Bank of Japan implemented quantitative easing policy in the early 2000s to deal with deflation. In response to the global financial crisis that began in 2007, Bernanke of the Federal Reserve adopted the quantitative easing policy. Britain also uses quantitative easing as a financial policy to reduce the impact of the financial crisis. 20 10 1 1 The United States also adopted quantitative easing measures to stimulate its own economy. Please adopt