QE3
The Fed is going to buy up $40 billion in mortgage backed securities each month for the foreseeable future. It is trying to inject liquidity and keep rates low to discourage savings and encourage investment and spending. Obviously there will be pressure on bond yields and it should spur the broader stock markets. But it is not clear to me that it will help spur job creation. I'm not concered about inflation in the short term - which some are crying about - because worldwide currencies are weak as a result of the global economic crisis. However, there has to be some erosion in the value of the dollar. As this happens, the cost of oil and gas will rise. Unlike many macro-economic statistics, the price of gas has a big impact on individuals.
The gains of any future improvements in employment will not be felt in the next 50 days, but if oil futures and gas prices rise - as they should - it is likely that this could have an impact on the election. It just depends on how much of an impact it has. It should be interesting to watch.
posted by Rob @ 9/15/2012 09:01:00 AM
3 comments
3 Comments:
Rob, is the US govt essentially printing money now?
Sure it is. But, that is not necessarily a bad thing. If done well and managed carefully, it is a legitimate way to spur the economy and manage the debt. As long as investors (primarily large foreign investors and central banks) don't complain too much, the value of the dollar won't collapse and we should be fine.
The thing that the Fed has that is allowing them to do this is that there is worldwide economic weakness. Europe is in trouble, the Middle East is burning, and even in China and India, there are slowing economies, so there is acceptance for the Fed's quantitative easing policy - which is essentially printing money.
Two questions:
1. Please explain how printing money "manages the debt".
2. What happens if investors start to complain a little too much?
Dennis
"A 1/32 Cherokee Tea Party guy having fun"
“That’s why today, I’m pledging to cut the deficit we inherited by half by the end of my first term in office.” -Barack Obama, Feb. 23, 2009
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