Quantitative Easing - explained

Quantitative Easing & money supply management by central banks:

Quantitative Easing (QE) is a term very often in the news in recent times. Let us take a look at the what, why, how and when of it:

What it is:

It is a monetary policy that is used by governments to increase money supply. It is an unconventional system and is usually used only when the conventional methods of increasing money supply have become ineffective. It was first used by the Bank of Japan in early 2000’s to fight domestic deflation. More recently, it has been employed by the USA, UK and the Eurozone during the financial crisis of 2007-2010.

Why and when it is done:

Central Banks attempt to increase money supply in poor economic conditions when spending is low. There are various methods to accomplish the same, one of which is quantitative easing. Quantitative easing is sometimes viewed as a last resort measure when the more accepted methods of increasing money supply have become ineffective. It is generally employed when the interest rates are near 0% and have failed to produce the desired effect.

How it happens:

It is implemented by the central bank purchasing financial assets such as government securities or other securities from the banks and other public/private institutions with the newly generated money. This floods the targeted institutions with capital and hence increases the money supply. It is thus an attempt at driving up spending and hence consumption in situations when even a near 0% interest rate fails to elicit spending (the economy is in a liquidity trap).

Risks & Questions on effectiveness:

• More money enters the system without a corresponding rise in the amount of goods available. This will eventually lead to higher prices i.e., inflation. This nature of generating more money without more goods leads to quantitative easing sometimes being referred to as “printing money”.
• Increasing the money supply tends to depreciate the concerned currency’s exchange rates versus others. This directly harms creditors and holders of the currency as the real value of the currency decreases. Also, importers will be harmed as the cost of imported goods will be inflated by the depreciation of the currency. This could drive up prices of imported goods sharply.
• There is always the risk that the new money could be used by the banks to invest abroad and in asset classes like emerging markets, commodity-based economies, commodities themselves and non-local opportunities rather than to lend to local businesses.

QE could thus prove useless unless it is combined with effective policy measures in other areas.

Illustration by the Bank of England:

Further Reading:

• Quantitative Easing - an interactive graphic: http://www.ft.com/intl/cms/s/0/69e8c92c-e758-11df-880d-00144feab49a.html#axzz1c1MzJOIo
• Japan's sobering experience of quantitative easing: http://www.economist.com/node/14649284
• "Quantitative Easing" is simply a toxic phrase for a routine monetary policy - an opinion on Forbes:
  http://www.forbes.com/sites/beltway/2010/08/26/quantitative-easing-is-a-toxic-phrase-for-a-routine-policy/
• Nouriel Roubini a.k.a Dr.Doom's views on QE3: http://www.cnbc.com/id/44276918/QE3_Is_Coming_by_Year_End_Roubini

A Mid Summer Day's Ad

Summer Vacation.

Grandma's Place in the village or in a small town.

Sunday Afternoon.

Sweltering Heat.

Sitting on the floor right under the fan.

A Test match on DD with Hindi commentary.
Players with clothes that were 2 sizes larger.
Wills Logo with White CAPITALIZED letters on a red background.
Sachin, Azhar, Kumble, Srinath & co waging the cricket battle vs the oppositions.

The Dreaded Circle Rainbow appears on the screen:

A battle of another kind was then unleashed - the battle to lodge brands & products in your mind and find a way to your pockets.

Little did we realize back then that these would stay in our memories so long!
Thanks mainly to some of their iconic BGM's & jingles!!

A look at some of the wonderful ads that I watched on Indian TV as a kid (the 90's):

1) The classic "Hamara Bajaj" AD - we can never forget this one. Emotion packed entertainer.
It very much caught the pulse of the Common Indian then.
We can almost still remember the visuals of the guys riding the scooter and scattering the crowd of pigeons and the parsi uncle wiping his scooter squeaking clean  :)



2) Of course, one of the most endearing ads to the kids of the age : The "I am a complan girl/boy" ad :)



P.S: I'm sure Shahid and Ayeesha will agree :D

3)  Ah, and who can forget the "washing powder Nirma" one. A lot of school nicknames also resulted from this one :D

Couldn't get the old ad's video. puttin up the audio n the slightly newer one's vid:







4) And the old Cadbury ad - was almost like watching an extension of the match in the break :D :)



5) The sundrop ad - another one i distinctly remember due to the yellow tint to the entire ad, the kid's antics through the maze of food items - especially his somersault - and of course, all the delicious food :D



6) And the milky bar ad - one of the ads that actually influenced our family purchases of the time :D



7) Not exactly an ad on DD during a cricket match, but one that I remember well nevertheless:
The Old Cinthol (literally :D) ad featuring Arvind Swamy:



8) And though we were kids, this one definitely did catch our imagination :P :
Pretty Preity shaking her leg for the Liril ad:

9) Of course, no list of ads can be complete without one featuring Fevicol - they have made some of the best ads over the years. List of some of their best ads from the 90's:

(9A) The prolonged climax scene one:



(9B) The unbreakable egg one:



(9C) The "onnu rendu moonu naalu" one, a.k.a the fishing one:



(9D) The sticky shadow one a.k.a the Radio one:



10) The nescafe ad, mainly for its Jingle:



11) An ad that was part of the white revolution and one that I remember for teaching me one of my first hindi words other than "tumhara nam kya hai?" :D



12) One of the ads that I remember was repeated to the point of irritation and was around for a really long time. Memorable, nevertheless :P


13)  Another ad that had an extremely catchy jingle. Dunno if it was national or regional. Putting up the tamil version:




14) Yet another one remembered for its awesome jingle:



15) And of course, who can ever forget the "VICCO Turmeric" ad.
Generations will remember this. They have NEVER changed :D
You can still see these ads in the theatres (we often wonder how old the model in the original ad must now be :P )




A lot may have changed since then. But not the motive of them marketers -
They have had, have and will have only one mantra : "Sell. Sell. Sell"

I sometimes wonder - isn't marketing supposed to be more than just selling stuff? Point to ponder.

Cheers till the next time then!