Quantitative easing, or QE for short, a monetary policy defined as the practice of introducing new money into the money supply by a central bank. The central bank carries out this process whenever it begins buying financial assets from commercial banks and other financial institutions, raising the prices of those financial assets and lowering their yield while increasing the money supply simultaneously. In more recent years, due to the territory’s economy, Europe has recently undergone the endeavor of implementing a quantitative easing program.
Under the guidance of the European Central Bank’s president Mario Draghi, and a few years after Japan’s and the United States’ implementation of QE programs, in March of 2015 Europe began pumping its markets with cash. The ECB, and national central banks in the eurozone, began creating new money to buy bonds at a monthly rate of 60 billion euros, about 85 million United States dollars. Not long after the program’s initial beginning, Europe began making changes to its QE program and policies. A recent publication by Bruegel states:
The European Central Bank (ECB) has made a number of significant changes to the original guidelines of its quantitative easing (QE) program since the program started in January 2015. These changes are welcome because the original guidelines would have rapidly constrained the program’s implementation.
The article continues to discuss the European Central Bank’s changes in its QE program, going on to say:
The European Central Bank (ECB) has made a number of significant changes to the original design of its quantitative easing (QE) programme since the programme started in January 2015. The bank has expanded the list of national agencies whose securities are eligible for the Public Sector Purchase Programme (PSPP); it has changed the issue share limit (ensuring that the Eurosystem will not breach the prohibition on monetary financing), which was originally set at 25 percent, to 33 percent (at least for securities without collective action clauses); it has added regional and local government bonds to the list of eligible assets; it has announced that the programme would continue past September 2016, the previously-announced minimum end-date, to March 2017 “or beyond, if necessary”; and it has declared its intention to reinvest the principal payments on the securities purchased under the program as they mature.
The article then goes on to discuss some risks that are possible in Europe’s newest monetary policy while the continent seeks financially stability through its programs like quantitative easing, stating:
One of the purposes of monetary policy is to support the economy by encouraging more risk-taking at a time when risk-taking in the financial system is less than socially desirable. However, if risk-taking becomes excessive and goes beyond what is socially desirable, it might contribute to future financial instability.
As Europe continues to show no signs of slowing down its quantitative easing program while it struggles to get its economy back in shape, the growth of uncertainty and risk continues to exist within these types of monetary policies Europe has begun embarking upon. Are you interested in learning more about gold ownership and the security it can provide within a risk taking and unstable global economy? More than one million users in 150 countries spend, save, and even earn in real gold using Goldmoney.
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