SciSimulator

QE & QT Simulation: Central Bank Balance Sheet Expansion and Contraction

GuideQuiz

Expansion & Contraction: The Secret of the Central Bank's Money Printer

Watch the flow of money between the three players (Treasury, Primary Dealer, Central Bank) to grasp how Quantitative Easing (QE) and Quantitative Tightening (QT) actually work.

QE · Step 1QE · Step 2QE · Step 3QE · Step 4TreasuryIssues bonds to borrow (cannot print money)Primary DealerBond wholesaler (e.g. JPMorgan)⭐Central Bank / FedMoney printer ⇄ shredder$$Market Liquidity: $100BBaseline $100B
Ready
QE Demo · Ready
The economy is in recession, businesses are failing, no one dares to spend. The central bank prepares to "hit the gas" and rescue the market. Click "Start Demo" to begin the QE process.

Experiment Controls

When the economy slumps, the central bank "hits the gas": creating money out of thin air to buy bonds, injecting liquidity into the market.

Central Bank Balance Sheet

Assets (Treasury bonds held)$0B
Liabilities (printed money / reserves)$0B
First principle: Assets = Liabilities. Whatever the central bank buys in assets, it must conjure an equal amount of liabilities (i.e. print money) to match.
Risk-Free Rate
Normal (~2-3%)
Asset Valuation (equities/commodities)
Normal
Inflation Pressure
Target 2%
Legend & First Principle
$$ Cash / reserves (the central bank's liability)
Treasury bonds (the central bank's asset)
The size of the "sheet" = the total "lifeblood (money supply)" of the financial system.