The third round of quantitative easing monetary policy in the United States is nothing more than buying government bonds. How will it affect employment and inflation? What does the government usually do with money? The quantitative monetary easing policy of the central bank to improve the money supply through open market operations can be regarded as creating a certain amount of money out of nothing, or it can be simplified 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.

Impact of this policy:

Inflation risk

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 when experiencing deflation. Continued quantitative easing will increase the risk of inflation.

From the perspective of the global market, quantitative easing will also bring disasters to other economies hit by the financial crisis and promote the devaluation of other countries' currencies. This will deal a huge blow to the US dollar, a global settlement and payment tool, and will also bring serious losses to countries with high US dollar assets.

Stimulus loan

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.