Successfully reported this slideshow.
We use your LinkedIn profile and activity data to personalize ads and to show you more relevant ads. You can change your ad preferences anytime.

What is Quantitative Easing and how does it affect markets?

4,835 views

Published on

With the lagging economy, the US Federal Reserve has hinted towards a third round of quantitative easing to improve credit flows in the system. But what is Quantitative easing, and will it contribute to economic growth? Learn now:

What is Quantitative Easing and how does it affect markets?

  1. 1. What is Quantitative Easing and how does it affect markets?
  2. 2. How does QE work? Banks supplies specified bond instruments Fed supplies money to banksThe term quantitative easing (QE) describes a form of monetary policy used by centralbanks to increase the supply of money in an economy when the central bank interesteither at, or close to, zero.In QE US Fed would buy the designated bonds from the US banks in exchange for cashUS Dollars
  3. 3. Banks supplies designated bond instruments Fed supplies money to banksQE is intended to improve the flow of credit in the economy byflushing the banking system with funds Banks lend the funds to consumers and business
  4. 4. Side Effects of QEBanks & FI lends money to hedge funds & clientswho in turn speculate on asset marketsQE can improve credit flow in the system. But thatcredit could be directed more towards speculativeassets and less to real economy
  5. 5. Effect of QE on various assetsThe 8 major central banks of the world have nearly doubled their balancesheet through various quantitative easing programs… that is equivalent to aliquidity infusion of nearly 7/8 trillion USD over last 52 months!
  6. 6. Effect of QE on various assets Post QE1: Brent gained 125%, Gold gained 41% & Silver gained 63% Post QE2: Brent gained 84%, Gold gained 65% & Silver gained 183%
  7. 7. Why QE might not help real economy Banks supplies specified bond instruments Fed supplies money to banksFed supplies banks with cash but banksdo not lend to consumer or business, asbanks are risk averse +++ Banks are Liquidity Trapsaddled with bad loans
  8. 8. Thank You! • READ MORETwitter Website Facebook
  9. 9. Registered office: Kotak Securities Limited, 1st Floor, Bakhtawar, 229, Nariman Point, Mumbai -400021. Correspondance Address :Kotak Securities Limited, Infinity IT Park, Bldg. No 21, Opp FilmCity Road, A K Vaidya Marg, Malad (East), Mumbai 400097. Tel no :66056825. SEBI RegistrationNo: NSE INB/INF/INE 230808130, BSE INB 010808153/INF 011133230/INE 011207251, OTC INB200808136, MCXSX INE 260808130.Disclaimer: Investments in securities are subject to market risks, please read the SEBI prescribedCombined RDD prior to investing. Our research should not be considered as an advertisement oradvice, professional or otherwise. The investor is requested to take into consideration all the riskfactors including their financial condition, suitability to risk return profile, and the like and takeprofessional advice before investing.Our research should not be considered as an advertisementor advice, professional or otherwise. The investor is requested to take into consideration all therisk factors including their financial condition, suitability to risk return profile, and the like andtake professional advice before investing. Derivatives are a sophisticated investment device. Theinvestor is requested to take into consideration all the risk factors before actually trading inderivative contracts. Please note that the views disclosed in the Tweetinar are general in natureand the viewer is requested to take professional advice before investing.

×