Frankfurt
- After its
decision to buy €60 billion euros in low-risk corporate bonds over the next
year,
the European Central Bank ECB Wednesday granted €442 billion of one-year loans to banks across Europe,
at a lending rate of 1%. The ECB's has pencilled in further one-year loan auctions for 30 September and 16
December. Wednesday's operation raised the ECB's total outstanding market loans to a record
€897 billion. In the US, Federal Reserve policymakers voted to
maintain the size and pace of their $1.75 trillion
(€ 1.26 trillion) program to buy mortgage debt and
Treasuries.
Quantitative easing
is what non-economists call 'turning on the printing
press', although money is created electronically. Under this
policy, interest rates are close to zero. The central banks
buy up financial assets, including treasuries and corporate
bonds, either from banks or from the commercial sector,
using money they have created ex nihilo (out of
nothing). Quantitative easing may lead to
hyperinflation.
