Recently, I’ve been seeing people debate what QE is and how it affects the market. I’d like to share some insights based on my experience monitoring the market.

Basically, QE (Quantitative Easing) is a monetary policy tool used by central banks when conventional measures are no longer effective. Instead of just adjusting interest rates, they create new money and use it to buy financial assets, mainly government bonds. The goal is to increase the money supply, lower long-term interest rates, and encourage lending and investment.

Looking back at history, you’ll see what QE truly means and why it’s so important during crises. In 2008, after the financial collapse, the Fed began buying government bonds and mortgage-backed securities. They carried out three consecutive rounds of QE from 2008 to 2014, with a total value of 3.7 trillion USD. Similarly, in 2015 the ECB rolled out an asset purchase program at a scale of €60 billion per month (later increased to €80 billion in 2016) to combat deflation in the eurozone. The Bank of Japan also used QE from 2001-2006 to escape a prolonged recession.

In practice, QE has significant benefits. It helps increase liquidity in the system, reduce borrowing costs, and encourage businesses and individuals to invest more. When interest rates are close to 0 and traditional tools lose their effectiveness, QE becomes the last resort to stimulate the economy.

But not everything is good. I’ve clearly seen the side effects of QE. First is inflation. When too much money is created, prices can surge, especially when the economy is operating near maximum capacity. Second, QE can create asset bubbles. When interest rates are too low, investors look for higher-risk investments to chase yield, leading to speculative behavior and market volatility.

Third, QE increases inequality. The main benefits tend to be concentrated among financial institutions and wealthy people who own assets, while ordinary workers benefit less.

Looking at its impact on financial markets, when QE is implemented, bond markets usually rise because central banks buy them back, pushing yields down. Stock markets also benefit from this abundant liquidity—investors shift from bonds to stocks in search of higher returns. Exchange rates are also affected, because an increased money supply tends to weaken the currency. Commodity prices such as oil and gold also tend to rise.

Incidentally, Japan’s experience is quite interesting. Even though it implemented QE from 2001-2006, it didn’t really stimulate spending because people remained worried about the future. What’s more, the yen depreciated, increasing import costs. Similarly, QE in the US from 2008-2014 also had unintended consequences such as higher inflation, asset bubbles, and further deepening inequality.

In addition, I also want to say that QE is not a perfect solution. It needs to be carefully managed and combined with other measures. For investors, understanding what QE is and how it works is very important, because it will directly affect your investment decisions. Developments related to this monetary policy often create both significant opportunities and risks in the market.