Why do we need inflation?

At first, the loss of purchasing power sounds more like a disadvantage. However, slight inflation is preferable to deflation. This is because in deflation the economy suffers because private individuals do not spend money on consumption and companies do not make investments.

So there is little money in circulation, which affects the economy. People lose their jobs, further driving deflation. Therefore, mild inflation that does not exceed 2% is preferable.

With low inflation, money loses value slightly, but the economy is stimulated. New jobs are created because companies make investments and private individuals buy consumer goods. However, it is important that inflation does not degenerate and is kept at a stable level, otherwise bread rolls would soon cost several thousand euros.

Who has already used this measure?

Quantitative easing has been used in recent years by central banks in the USA, Great Britain and Japan, for example. The European Central Bank (ECB) implemented the measure for the first time in March 2015. In the process, assets were purchased from commercial banks. These asset purchases support economic growth in the euro area and contribute to a stable inflation level close to 2%.

Criticism of quantitative easing

The monetary policy of quantitative easing was criticised as early as 1912 by the economist Ludwig von Mises. He claimed that credit expansions create periods of depression after an economic boom period. These depression periods are only created by the repeated attempts to manipulate the market through quantitative easing. The market is thus artificially inflated with money, which makes the subsequent depression periods all the more severe. This can lead to a final catastrophe for the monetary system in question.

Conclusion

exnessthai explaines this situation in this way: มาตรการผ่อนคลายเชิงปริมาณเป็นมาตรการกระตุ้นเศรษฐกิจเมื่อลดอัตราดอกเบี้ยเล็กน้อยไม่มีผลกระทบใด ๆ อีกต่อไป. ธนาคารกลางซื้อหลักทรัพย์จากธนาคารและจัดหาเงินทุนสภาพคล่อง. ธนาคารสามารถส่งต่อให้กับ บริษัท หรือเอกชนในรูปแบบของสินเชื่อราคาถูก. บริษัท สามารถทําการลงทุนกับ exness โกง และบุคคลทั่วไปได้รับการสนับสนุนให้ซื้อสินค้าอุปโภคบริโภค.

Quantitative easing is a measure to stimulate the economy when lowering nominal interest rates no longer has any effect. Central banks buy securities from banks and thus provide them with liquid funds. The banks can then pass these on to companies or private individuals in the form of cheap loans. Companies can thus make investments and private individuals are encouraged to buy consumer goods.

This boosts the economy and counteracts deflation. In the long run, this creates new jobs. Mild deflation that does not exceed the 2% limit is preferable to deflation in order to keep the economy functioning. However, it is important that inflation does not degenerate, because otherwise money would no longer have any value.