Explained: Quantitative easing – and why Ace Magashule caused a crisis by mentioning it | BISouthAfrica
It usually works like this: a central bank creates money out of thin air, electronically, by simply typing in new amounts on its balance sheet. This is a unique super-power of central banks.
Usually the central bank buys government bonds from financial companies, but different central banks have bought different things – like mortgage-backed assets and bonds issued by private companies. The American Fed expanded its balance sheet by about $3.5 trillion via quantitative easing, while for the European Central Bank it was more than €2.5 trillion.QE is credited for bringing the US back from the brink after the financial crisis, while it played an important role in saving the EU from the European bond crisis.
The big fear was that creating new money would spark inflation: printing money usually does. But that didn’t happen.In short, South Africa is not the US or the EU. It doesn’t have a strong and stable currency, investment-grade bonds, or super-low inflation.
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