What’s the Difference Between Quantitative Easing and the Fed Buying Securities?

Question: What’s the distinction between “quantitative easing” and the Federal Reserve simply buying and selling government securities to affect the nation’s money supply?

Paul Solman: The distinction is that when the Fed is selling, it’s sopping up money from the banking system; when it’s BUYING, it’s pouring money in. THAT is quantitative easing: “easing” the economy by increasing the “quantity” of money out there. The key is that when the Fed BUYS, it does so with electronic money that it creates. See our explanation, complete with spiffy graphics.