The idea is simple: the central bank buys from commercial banks other people's debts. Who are these 'other people'? They can be families that owe mortgages to the bank, corporations, or even a government that has sold bonds to the bank. In exchange for these debts and the stream of income they produce, the central bank deposits dollars or euros in an account the commercial bank keeps at the central bank. Where does the central bank find the money? From thin air, is the answer: they are just numbers that the central bank conjures up and adds to the commercial bank's account. Why do this? In the hopes that the commercial bank will use this money by lending it to businesses wishing to invest and to families wanting to buy houses, cars, gadgets and so on. If this happens, economic activity will rise again as liquidity sets in. [...]

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To cut a long story short, a great deal of believing must occur before QE delivers on its promise to boost the real economy. [...] banks tend to lend the money conjured up by the central bank not to other banks or to Jack and Jill but to companies. Except that these companies do not invest the borrowed money in machinery and workers, fearful that the demand will not be there for extra output produced. What they do is to buy back their own shares in the stock market in order to increase their price and collect a nice bonus for having 'added value to the company'. While this process does boost, to some extent, upmarket house prices and demand for luxuries, the only genuine beneficiary is gross inequality.