Quantitative Easing

Financial Times  Aug 26  Comment 
Some commentators even moot the idea of a resumption of quantitative easing
Wall Street Journal  Aug 26  Comment 
Ray Dalio, founder of the world’s largest hedge fund, is predicting that the Federal Reserve will launch a fresh round of quantitative easing rather than tightening at its coming policy meeting in September.
MarketWatch  Aug 19  Comment 
The evidence isn’t there to say quantitative easing worked the way former Federal Reserve Chairman Ben Bernanke says it did, a new paper argues.
guardian.co.uk  Aug 16  Comment 
Economists have always feared that once everybody starts printing money, one player would break ranks. If that player is massive – like China – the impact would be to export stagnation to the rest of the world One of the strangest things about...
guardian.co.uk  Aug 14  Comment 
The Labour leadership frontrunner has proposed ‘people’s QE’ to fund infrastructure, instead of banks, but Yvette Cooper says it is bad economics Jeremy Corbyn, the frontrunner in the Labour leadership election, has proposed “people’s...
Benzinga  Aug 12  Comment 
In a new report out this week, Barclays analyst Hajime Kitano explains why China’s devaluation of the yuan is essentially quantitative easing and why the move could have major positive implications for U.S. stocks. After some disappointing...
The Economist  Aug 6  Comment 
BIG crises can lead to big political upheavals. Think of the Depression and the subsequent rise of fascism in Europe and the New Deal in America. What is remarkable about the financial crisis of 2008 is the limited nature of the reaction. Protest...
newratings.com  Aug 6  Comment 
LONDON (dpa-AFX) - The Bank of England retained its key rate unchanged at a record low in a split vote, while policymakers unanimously decided to keep quantitative easing at GBP 375 billion. The Monetary Policy Committee voted 8-1 to maintain...
guardian.co.uk  Aug 3  Comment 
Richard Murphy, recruited by Jeremy Corbyn to draft economic policy, says shadow chancellor’s attack on ‘people’s quantitative easing’ is wrong The author of the economic plan set out by Labour leadership contender Jeremy Corbyn has...
Financial Times  Jul 29  Comment 
Policy makers face similar challenge to Fed as it exits from quantitative easing


Quantitative easing is a monetary policy tool in which a central bank—like the Federal Reserve—floods the market with cash in an attempt to stimulate an economy in recession and to stave off deflation. The idea is that if the central bank floods enough cash into the market, it will set off the following chain of events:

  1. Banks and other financial institutions will build up larger and larger cash reserves
  2. Banks will finally decide to loosen their lending standards to utilize their excess cash
  3. Individuals and companies will start getting the loans they are seeking
  4. The economy will begin to recover as people and companies begin to spend again.Understanding Quantitative Easing

Quantitative easing involves flooding the market with cash. The question is...how does a central bank—like the Federal Reserve—flood the market with cash?

Quantitative easing requires the central bank to take the following three steps:

  1. Cut the short-term interest rate to zero percent
  2. Announce how long it will leave the short-term interest rate at zero percent
  3. Begin buying long-term securities—like Treasuries, corporate bonds and asset-backed securities

Why Would the Federal Reserve Resort to Quantitative Easing?

It seems that during good economic times, all we hear about is how concerned the Federal Reserve is with inflation. We can't let the economy grow too fast....We can't let the monetary base get too big....We can't just print money—the Fed says.

But during bad economic times, all of that seems to change. And during really bad economic times, we even start to hear about quantitative easing. But what does quantitative easing do for the economy?Benefits of Quantitative Easing

Quantitative easing can help consumers, exporters and financial institutions find their way out of a recession and offers some of the following benefits.

  1. Quantitative easing can lower longer-term interest rates by pushing down yields at the far end of the yield curve.
  2. Quantitative easing can lower deflationary expectations by promising to keep interest rates low for an extended period of time.
  3. Quantitative easing can stimulate exports by increasing the monetary base.

Connecting Quantitative Easing to Government Spending (fiscal budgetary security tools)

Although monetary and fiscal models are normally viewed separately, QE as a monetary tool is so similar to deficit spending that the two lend themselves to a common view based on their immediate purpose: each is concerned with national and global security--to prevent chaos in trade and tragedy among nationals working in their own country.

QE and DS create necessary demand to protect people and nations from economic crises that may bring casualties in very large number and very short order. Both can create demand without limit -- except for the purchasing power of money after they become effective.

Each can be partially controlled by ending them. When either has done more harm than good their common remedy is taxation to prevent hoarding and policing to prevent tax evasion.

Accordingly, QE and DS require intense monitoring while in progress -- preferably by extremely sophisticated data analysts with tools akin to those of a national security agency with the highest priority on effectiveness not their cost.


Video: Understanding Quantitative Easing. Learning Markets. Retrieved on 2009-01-24.

Speech: Chairman Ben S. Bernanke. The Federal Reserve Board (1/13/2009). Retrieved on 2009-01-24.

Quantitative Monetary Easing and Risk in Financial Asset Markets. The Federal Reserve Board (9/282004). Retrieved on 2009-01-24. Bold text

Wikinvest © 2006, 2007, 2008, 2009, 2010, 2011, 2012. Use of this site is subject to express Terms of Service, Privacy Policy, and Disclaimer. By continuing past this page, you agree to abide by these terms. Any information provided by Wikinvest, including but not limited to company data, competitors, business analysis, market share, sales revenues and other operating metrics, earnings call analysis, conference call transcripts, industry information, or price targets should not be construed as research, trading tips or recommendations, or investment advice and is provided with no warrants as to its accuracy. Stock market data, including US and International equity symbols, stock quotes, share prices, earnings ratios, and other fundamental data is provided by data partners. Stock market quotes delayed at least 15 minutes for NASDAQ, 20 mins for NYSE and AMEX. Market data by Xignite. See data providers for more details. Company names, products, services and branding cited herein may be trademarks or registered trademarks of their respective owners. The use of trademarks or service marks of another is not a representation that the other is affiliated with, sponsors, is sponsored by, endorses, or is endorsed by Wikinvest.
Powered by MediaWiki