QE and the Money Multiplier Myth
Frances Coppola
25 years: Economic commentary & banking
In this video, Frances rectifies the myths related to Quantitative Easing, including who creates money, the money multiplier effect, the decreasing effects of interest rates, and increasing pressure on inflation.
In this video, Frances rectifies the myths related to Quantitative Easing, including who creates money, the money multiplier effect, the decreasing effects of interest rates, and increasing pressure on inflation.
QE and the Money Multiplier Myth
10 mins 20 secs
In this video, Frances debunks the money multiplier myth, and instead suggests that commercial banks don’t need to have money available at the time that they make a loan. The most widely used form of QE is the large-scale asset purchases (LSAPs), which have the benefit of encouraging investors to diversify their risks. However, during the QE phases, there were some spillover effects, for example, raising prices of corporate bonds and equities.
Key learning objectives:
Identify who and how money is created
Explain the money multiplier myth
What is the most widely used form of QE?
Frances Coppola
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