By Derek Hunter
Early in the
financial crisis the Federal Reserve and Bank of Japan initiated a policy of
quantitative easing (QE), which is an extraordinary form of monetary policy
where a central bank purchases certain securities to infuse capital into the
financial system. By essentially printing money, a central bank hopes to stem
any deflationary risk, incentivize lending, and stimulate the economy. The
European Central Bank is finally hopping on the QE bandwagon as the Eurozone
risks falling into another recession. As The Economist explains, unlike in the centrally
controlled U.S. and Japanese economies, the Eurozone federation will face
unique economic and political challenges in implementing QE across several
different countries.
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