Fed shows more quantitative easing despite its failing up to now

quantitative easing is a Federal Reserve strategy that chairman Ben Bernanke has employed before, and he wants to do it again in one more effort to jump start the economy. Solely on the expectation that the Fed will invest in additional Treasuries to flood money into the system, the dollar is worth less, as are treasury yields, stocks are increasing and also the price of oil, gold, silver and commodities such as corn have increased. Joblessness, however, remains impervious to any stimulus, a condition the Fed suggests could possibly be changed with more quantitative easing. Source of article – Fed hints at more quantitative easing despite its failure so far by Personal Money Store.

Bernanke: QE2 may prevent deflation

Since rates of interest are nearing zero, there might only be one solution to the joblessness issue. Quantitative easing might be the only solution. Bernanke made a speech Friday in Boston where he said that a debilitating cycle of deflation might be begun by the joblessness which continues. Bernanke said that we need to consider inflation might be too low right now which is why limiting inflation as the Fed is doing may be a bad thing, reports CNNMoney.com. The dollar will become weaker with quantitative easing, which means we’d be putting more cash to the economy. The Fed now owns $2 trillion in assets. Since 2008, this has had no effect although that is what the Fed has been doing.

The economic system effected by the QE2 idea

The Fed has a meeting planned for Nov 2-3. This meeting is where the Fed will probably announce the QE2. The chance of the QE2 order taking place has made the economic system change, accounts the Associated Press. Bernanke begun it by hinting this was the plan. Oil prices went up. They went up 10 percent too. Americans are paying $400 million more a week for gas. $1,377.60 is the price of gold now. This is an 11 percent increase. A 30 percent rise occurred with corn futures. Since the 1950s, the average 30-year fixed mortgage has not been this low as it is now at 4.19 percent. Then there had been the change within the average rate of interest paid on a one-year certificate of deposit. There had been a .55 percent fall. Joblessness is nevertheless very close to double digits too.

Reasons QE2 will not continue

Bernanke explained that the QE2 had to help the economy while he was in Boston. Lower interest rates and a weaker dollar would make for much more spending and better corporate revenue in theory. It would also make unemployment go down with some jobs creation. CNN Money heard from Kevin Giddis of Morgan Keegan that since it has not worked yet, more quantitative easing obviously won’t help. ”I don’t think getting securities is going to pull the economic system out of a ditch,” he explained evidently. “The market isn’t purchasing it. We’ve made cash accessible freely for a while now. The Fed has to start thinking way outside the box. This isn’t a war where conventional weapons could be used.”

Information from

CNN Money

money.cnn.com/2010/10/15/news/economy/bernanke_speech/?npt=NP1

Associated Press

google.com/hostednews/ap/article/ALeqM5hJprdjYORlZxJiFlMznIOBO7fs4A?docId=afebcea0bbfd4992bc5c4f9b46886f7c