Quantitative Easing

Explanation

QE was deployed on a massive scale after the 2008 financial crisis and again during the 2020 pandemic. The Federal Reserve's balance sheet grew from $900B in 2008 to nearly $9 trillion by 2022. QE works by: (1) lowering long-term interest rates (buying bonds pushes prices up, yields down); (2) encouraging risk-taking (lower safe yields push investors into stocks and corporate bonds); (3) creating wealth effects (rising asset prices make people feel richer, boosting spending). Critics argue QE inflates asset bubbles and disproportionately benefits wealthy asset owners.