I see that many people are still confused about QE or quantitative easing, which is the main news in the global financial markets. I myself have wondered what exactly QE is and how it works to have such a significant impact.

Simply put, QE is when the central bank injects a large amount of money into the economy by purchasing various long-term financial assets to increase liquidity in the system and lower interest rates. The result is that commercial banks have more cash on hand, ready to lend to businesses and individuals. Businesses are also motivated to borrow more for investment.

But what’s interesting is that QE is an unusual measure because it distorts the normal financial system with a huge amount of money. The central bank hopes it will help drive economic recovery, but the side effects are not insignificant.

The first is currency depreciation. As more money flows into the system, its value decreases, making imports and raw materials more expensive. Especially for countries that rely on imports, the general price level of goods also rises accordingly.

More importantly, the injected money doesn’t all flow into the real economy; most of it accumulates in the hands of those who already hold assets. This leads to seeking returns across various assets, causing stock prices, real estate, and gold to rise significantly. This is where I start to worry about asset bubbles because this kind of expansion may not be based on real value.

Another overlooked issue is the widening inequality gap. Asset owners benefit from rising prices, while those without assets see inflation eroding their purchasing power. This is why, even if central banks inject large amounts of money, inflation remains slower than expected because wealth isn’t reaching most people.

To cope with this new round of QE, I think investors should be cautious in the stock market right now because the situation is different from ten years ago. This time, QE measures are implemented quickly, and the market hasn’t fully assessed the economic damage yet. Timing the entry carefully is essential.

Another interesting asset class is currencies. Because money printing causes the currency to weaken, investors can use tools like CFDs to short the QE-affected currencies that are likely to depreciate, and go long on more stable currencies to reduce risk. Bitcoin and gold are also gaining interest as assets during this money injection, as many investors see them as hedges against the devaluation of fiat currencies.

In summary, QE is an unconventional and risky tool, but if you understand its mechanisms and side effects, investors can adapt and find opportunities in the market. Having comprehensive information will be key to helping our portfolios survive and profit even in times of crisis.