A Really Simple Explanation of What QE (Quantitative easing) Is

An American borrowed one million U.S. dollars from bank to build a house. After all the borrowed money spent and house finished then this American found he couldn't repay the loan. He run away to Bahamas and left the newly built house to the bank.

The bank had the repossessed house which didn't want. The bank wanted one million dollars back. Writing off one million dollars from the book made hard for the bank to make more loans. Money market became frozen.

Now U.S. Federal Reserve came to help.

Fed Reserve started printer machine, printed one million dollars and gave newly printed money to the bank. So the bank could lend again. Frozen currency market got easing.

Fed Reseve added one million dollars liability because new money, to balance this Fed Reserve sold one million dollars mortgage backed security as low yield sovereign debt to government bond investors.

The result was one million dollars asset added into American property market; the bank had the loan paid back and could continue lending; Fed Reserve provided urgently necessary liquidity to the market; and bond investors got screwed ...