<p>As for what I've understood: by buying the bonds they're providing the system (banks) with liquidity. The banks in turn are supposed to lend this money out to people and businesses, i.e. increasing the money supply which otherwise would stay as assets on the banks' balance sheets. 
By buying the bonds they're simultaneously lowering the rates on them since the prices go up (i.e. giving us lower rates). This in turn makes us more willing to loan if the rates are lower.    </p>

CC BY-SA 3.0
2017-08-10T06:48:47.027Z
2017-08-10T06:48:47.027Z
JMats
<p>First of all, I'm not sure you are reading that article correctly, as I cannot find any mention of the claim you make. In any case, you can find <a href="https://files.stlouisfed.org/files/htdocs/publications/review/13/01/Fawley.pdf" rel="nofollow noreferrer">here</a> a superb comparative analysis of QE for the Fed, the Bank of Japan, the ECB and the Bank of England. </p>

<p>Regarding money creation, the key difference between conventional monetary policy and QE is the <strong>type of asset</strong> being transacted (short-term government debt versus long-term government/private debt, respectively; again it depends on the central bank, see referred document). There is, to my understanding, no difference on how the monetary operations are carried out in each policy. </p>

<p>In fact, these operations are quite standard. The central bank buys assets by crediting the seller's bank account, in exchange for the ownership of the assets, which are then added to the central bank assets and eliminated from the sellers assets. This is akin to you receiving a deposit in your current account. You have been credited with some amount. There is no <strong>physical</strong> money creation or physical money transfered in the process itself. There is indirect money creation (all electronic) if such transactions enable the banks to expand their credit to other institutions or companies (provided demand for such credit exist and banks are willing to do so, e.g. in an economic boom), whilst still complying with the <a href="https://en.wikipedia.org/wiki/Fractional-reserve_banking#Reserve_requirements" rel="nofollow noreferrer">regulation</a>.</p>

<p>To learn more about money creating and modern banking, I suggest <a href="http://positivemoney.org/how-money-works/advanced/how-central-banks-create-money/" rel="nofollow noreferrer">this page</a>, <a href="http://www.investopedia.com/articles/investing/081415/understanding-how-federal-reserve-creates-money.asp" rel="nofollow noreferrer">this page</a> or <a href="https://economics.stackexchange.com/questions/3130/how-does-a-central-bank-create-the-money-used-for-quantitative-easing-or-lowerin">this post</a>.</p>

CC BY-SA 3.0
2017-08-10T08:07:44.007Z
2017-08-23T13:09:15.710Z
2017-08-23T13:09:15.710Z
luchonacho
<p>I knew that when the Fed in the US buys bonds through Quantitative Easing, it does so using money it has from previous profits and that it doesn't print new money.</p>

<p>However, I was reading <a href="https://www.bloomberg.com/quicktake/europes-qe-quandary" rel="nofollow noreferrer">this article</a> about QE, which states that the European Central Bank prints new money when doing QE.</p>

<p>So the ECB, unlike the Fed, does print new money when doing QE?</p>

<money-supply><central-banking><quantitative-easing>
When the ECB does QE, does it print new money?
bsky
# When the ECB does QE, does it print new money?

(Asked by: username_0 on 2017-08-10)

I knew that when the Fed in the US buys bonds through Quantitative Easing, it does so using money it has from previous profits and that it doesn't print new money.

However, I was reading [this article](https://www.bloomberg.com/quicktake/europes-qe-quandary) about QE, which states that the European Central Bank prints new money when doing QE.

So the ECB, unlike the Fed, does print new money when doing QE?

**Tags:** money-supply, central-banking, quantitative-easing

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## 2 answers

### Answer by username_2 on 2017-08-10. Score: 3 | Accepted answer

First of all, I'm not sure you are reading that article correctly, as I cannot find any mention of the claim you make. In any case, you can find [here](https://files.stlouisfed.org/files/htdocs/publications/review/13/01/Fawley.pdf) a superb comparative analysis of QE for the Fed, the Bank of Japan, the ECB and the Bank of England.

Regarding money creation, the key difference between conventional monetary policy and QE is the **type of asset** being transacted (short-term government debt versus long-term government/private debt, respectively; again it depends on the central bank, see referred document). There is, to my understanding, no difference on how the monetary operations are carried out in each policy.

In fact, these operations are quite standard. The central bank buys assets by crediting the seller's bank account, in exchange for the ownership of the assets, which are then added to the central bank assets and eliminated from the sellers assets. This is akin to you receiving a deposit in your current account. You have been credited with some amount. There is no **physical** money creation or physical money transfered in the process itself. There is indirect money creation (all electronic) if such transactions enable the banks to expand their credit to other institutions or companies (provided demand for such credit exist and banks are willing to do so, e.g. in an economic boom), whilst still complying with the [regulation](https://en.wikipedia.org/wiki/Fractional-reserve_banking#Reserve_requirements).

To learn more about money creating and modern banking, I suggest [this page](http://positivemoney.org/how-money-works/advanced/how-central-banks-create-money/), [this page](http://www.investopedia.com/articles/investing/081415/understanding-how-federal-reserve-creates-money.asp) or [this post](https://economics.stackexchange.com/questions/3130/how-does-a-central-bank-create-the-money-used-for-quantitative-easing-or-lowerin).


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### Answer by username_1 on 2017-08-10. Score: 0

As for what I've understood: by buying the bonds they're providing the system (banks) with liquidity. The banks in turn are supposed to lend this money out to people and businesses, i.e. increasing the money supply which otherwise would stay as assets on the banks' balance sheets.
By buying the bonds they're simultaneously lowering the rates on them since the prices go up (i.e. giving us lower rates). This in turn makes us more willing to loan if the rates are lower.


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