What on Earth does quantitative easing mean?

Former_MSE_Guy · 6 October 2011 at 1:21PM

This thread is to discuss my MSE blog:

What on Earth does quantitative easing mean? How financial jargon alienates the masses

Just click reply to post.

vax2002 · 6 October 2011 at 1:24PM

Printing money and letting it loose in the economy.
Work a treat in Zimbabwe....

tagq2 · 6 October 2011 at 1:32PM

l fully expect a series of follow-ups entitled "gold standard and fiat currency - an angry contrast of deflation and inflation", "fractional reserve banking - I wish I could do that with my money!", "the Federal Reserve - investment masterpiece or ponzi?" and "how to troll Internet Libertarians".

JohalaReewi · 6 October 2011 at 1:52PM

Is it a euphemism for colonic irrigation ?

SnowTiger · 6 October 2011 at 2:19PM

Oh well, thanks for not explaining it. Probably best really.

There's a more detailed explanation at http://en.wikipedia.org/wiki/Quantitative_easing. :rotfl:

James · 7 October 2011 at 10:27AM

In a nutshell:

Taxpayers bailing the Bankers out (again)

Venusflytrap · 7 October 2011 at 11:00AM

This series of videos is also worth watching: http://video.google.com/videoplay?docid=-2550156453790090544#docid=5352106773770802849

dtsazza · 7 October 2011 at 2:44PM

I disagree with the general assessment - the point of the "jargon" is that it refers to a very specific (and well-defined) product which only exists in the financial sphere. The name is accurate and refers to exactly what that product is. The complaint seems analogous to complaining about using the jargon term of referring to a creature as a "cat", without specifying that you mean a small domesticated short-haired feline mammal - just because you hadn't heard the term cat before. Jargon is often just a term for any specific (and useful!) words related to a given field that the reader/listener doesn't understand, and while it has negative connotations it shouldn't.

We use names as labels - "CDS" refers to exactly that class of instrument, much more specifically and concisely than "insurance taken by lenders in case their borrowers don’t pay loans back" does.

Of course the intended audience needs to be taken into account - there's no point using terms that you know of your audience aren't going to understand, if you intend to inform them. But the other side of the coin is the risk of oversimplifying things; at the risk of sounding snobbish, if someone doesn't know what CDS or quantitative easing refers to (and aren't willing to spend thirty seconds looking it up on Google), they're unlikely to have an understanding of the broader context anyway.

In light of that, I see no problem in the official pronouncement being in the accurate "jargon" so that those who understand what's being said get it at face value; and then commentators translating it into simpler analogies for those that didn't get the specific definition. It's the best of both worlds that way.

rgchapman · 7 October 2011 at 3:23PM

Spot on dtsazza. The jargon is there for the people who use it not the layman. If we the public do not understand it, that is either our fault (for not finding out) or the fault of those reporting it for not explaining it in plain English.

tagq2 · 7 October 2011 at 3:40PM

Shell shock -> Combat stress reaction
Printing money -> Quantitative easing

The terms on the right are more recent and may refer to a more precisely defined experience but constituent words have much less impact. "Oh, it's not shocking, it's just a reaction." "Oh, it's not [e-]printing, it's just easing."

Carlin delivered a good monologue on this (it's got even worse than merely "PTSD" now).

MoneySaverLog · 8 October 2011 at 12:36AM

It means the banks are given money, HM Government then HOPE that the banks will lend this out. More likely they will horde it all.

To you and me that means there is more money out there, so paper money becomes worth less than it was before they printed it. This results in HIGH INFLATION.

QE is NOT good news for savers, and is more bad news with interest rates so low the money sitting in the bank is now eroding away :-( The only solution I see is to risk capital for higher returns on the stock market, commodities and futures. But having fingers burn't in the past, feel that is a very risky strategy, so have to put up with these pittyful rates of return on investment with the banks.

What on Earth does quantitative easing mean?

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