printing money what does it mean

cowbutt

LittleMissAspie wrote: »

I don't understand why making things more expensive (because the pounds are worth less) will make people spend money. How is this going to encourage me, an ordinary person, to go out for a meal or buy some more books?

Causing inflation ("making things more expensive") isn't the desired result, but merely a likely consequence of increasing the money supply. If the money supply is increased (i.e. QE), then the theory goes, people will realise they have some money and start borrowing and spending again. Of course, eventually, the market notices the increased demand and willingness to pay current prices, so experiments with raising prices and finds no consequent fall in demand. If a central bank could increase the money supply without causing inflation, that would be something of an Alchemist's Stone.

Are there any examples where quantative easing has worked to stabilise an economy?

Japan at the beginning of the 21st century is the usual example: http://en.wikipedia.org/wiki/Quantitative_easing