Quantitative Easing and the Role of Banks

Quantitative easing is a way for banks to inject more money into the system. The government buys up banks and lends money against illiquid assets to provide cash. 85% of the money in the system is created by banks themselves through lending. During a financial crisis, banks become hesitant to lend, causing the money supply to collapse. The central bank tries to stabilize it, but it's not always enough.

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