Tuesday, October 19, 2010

Quantitative Easing only delays the inevitable

I am not sure what the Feds are thinking when they are looking at going back to quantitative easing. The term quantitative easing describes a monetary policy used by central banks to increase the supply of money by increasing the excess reserves of the banking system. The results speak for themselves.

With quantitative easing = economy up
Without quantitative easing = economy stagnant or on a downward trend

My question to the Feds is whether are you going to do "quantitative easing" forever? Is that the way to prop up the economy or should you try to find the root cause and resolve it? If no one is purchasing financial assets, including government bonds, agency debt, mortgage-backed securities and corporate bonds, from banks and other financial institutions, is there something very wrong with the assets and/or the risk management and/or the product structure?

I really like to see how long the Feds can continue quantitative easing. Why do they want to delay the inevitable?

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