Federal Reserve Pouring Money QE2 Unpredictable Fortune

by Himfr Mary - Date: 2010-11-17 - Word Count: 801 Share This!

U.S. economist Milton Friedman proposed a "throw the cash from a helicopter" view, while the practice of this theory in recent years, Ben Bernanke, in the United States won the "helicopter pilot Ben" title. November 3, as the market expected, "the's" helicopter taking off again, starting the second round of the quantitative easing policy.

The Fed will be before the end of June 2011 to buy 600 billion U.S. dollars of monthly long-term U.S. government bonds, expected monthly purchases of 750 billion dollars; will continue due to the balance sheet and reinvest the principal amount of bonds to buy Treasury's current policy.

QE2 effect remains to be seen

Standard Chartered Bank economist Dai Weise Clemens said, the Fed launched QE2 stronger than doing nothing, but the quantitative easing policy is like doing experiments, the Fed expanded the balance sheet and solid economic growth, the linkage mechanism is still not clear .

If you can not terminate the long-term continuation of the situation of high unemployment, Bernanke will disrepute; but if the 'firepower too much', it may re-create the future of the U.S. stock market, property market bubble ". QE2's smaller than many market analysts expect 10,000 billion, the Fed also proved the "firepower" worry too much, but the effects of domestic policy is bound to be discounted.

U.S. Federal Reserve Bank of Kansas City Thomas Heney hope that the QE2 would jeopardize the fragile U.S. economic recovery, calling it "dangerous gamble" and "do business with the devil." He Nixi 3 at the monetary policy decision-making on the QE2 regular meeting also voted against, due to inflation fears that the U.S. economy is expected to be harmful to future stability.

Slow pace of economic recovery in the United States, recession stocks after the business meeting the peak has passed, "liquidity trap" has occurred, the investor and consumer confidence in the context of, QE2 on the effect of stimulating the domestic economy is not ideal, but the negative spillover effect can not be discounted.

Lack of demand or the policy discount

Nobel laureate in economics Joseph Stiglitz that the U.S. is now the most serious problem is lack of effective demand, rather than the money supply is not enough; Fed monetary easing years ago led to a lot of liquidity into the property market, laid the 2007 subprime crisis seeds, QE2 States after the passive intervention may become the international financial system gully clouds.

Many economists say the current situation in the U.S. economy, the Fed continued to take a harm than the risk QE2, it seems to solve the short-term high unemployment, low inflation problem, but is likely to endanger the health of the U.S. economy sustained recovery in the future .

Intentionally or unintentionally, the depreciation of the dollar to avoid the QE2, dilution of debt, export advantages such as the United States made certain not to mention the international influence, only from domestic policy goals - and I hope by reducing long-term U.S. interest rates and inflation expected to stimulate enhanced business loan to expand production scale, public borrowing consumer point of view, Stiglitz and other experts believe that the Fed tries to inject liquidity measures to reduce long-term interest rates, first of all whether this in itself does not determine the desired effect; Second, even if the United States to promote the long-term rates down, whether entities to make loans to boost economic recovery does not say. This is because as supply-side funding in the tightening of bank loans, partly because the demand side of the business as a financial investor confidence is still not abundant.

In fact, the true measure of the effect depends on the Fed QE2 entrepreneurs and people are willing to spend money, it needs to be time to test. However, the Nobel laureate in economics Paul Krugman Luoke Luo November 1 article in the column pointed out that U.S. companies are not short of money, but the U.S. current capacity utilization is not high, why bosses by borrowing to expand production?

Be wary of the negative spillover effects

It is remarkable, QE2 may give other countries the negative impact on financial markets, spillover effects to be vigilant.

Standard Chartered Bank's latest report also pointed out that, QE2 will naturally put downward pressure on the dollar, while the emerging economies, capital inflows will continue to face increasing pressure, it may lead to new interventions in these economies measures and speculative real estate market activity inhibition.

"The Fed's monetary policy led to a considerable extent, the current chaos in the exchange rate disputes, has brought the international financial market instability, and could lead to new overseas asset bubble." Stiglitz respect. From October, the international Monetary Fund, the International Finance Association and other authoritative bodies have published many reports have pointed out that although the emerging markets of Asia, is leading the global recovery, but also faces very serious policy challenges of capital inflows.

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