Economist QE Primer July 2012

Ryan Avent linked this Economist special report – QE Primer which begins: 

THE conventional arms have run out. Central banks in America and Britain have long since pushed interest rates to close to zero. On July 5th the European Central Bank (ECB) joined them, slashing its rate on deposits to 0% and its main policy rate below 1%. A different sort of arsenal is now being deployed. Unconventional monetary policy covers everything from negative interest rates—now on offer in Denmark—to a change in inflation targets, but “quantitative easing” (QE), the creation of money to buy assets, has proved to be the most popular weapon of this crisis.

Its use is being stepped up. On July 5th the Bank of England (BoE) announced a £50 billion ($78 billion) increase in the size of its asset-purchase programme, to £375 billion in total. Speculation is growing that the Federal Reserve may launch another round of QE, its third, perhaps as soon as next month. There is pressure on the ECB to follow suit. With QE increasingly pivotal to monetary policy, how much bang for the buck (or yen or euro) does it deliver?