Fed shows more quantitative easing in spite of its failing so far

quantitative easing is a Federal Reserve strategy that chairman Ben Bernanke has employed before, and he wants to do it again in another effort to jump start the economy. The mere possibility the Fed will buy more Treasuries to pump cash to the economic system has devalued the dollar, lowered treasury yields, boosted stocks and elevated the price of oil, gold, silver, corn and other commodities. Joblessness, nevertheless, remains impervious to any stimulus, a condition the Fed suggests could possibly be changed with more quantitative easing. Article source – Fed hints at more quantitative easing despite its failure so far by Personal Money Store.

Bernanke feels QE2 will make deflation stop

Having lowered rates of interest to almost zero, quantitative easing is only arrow left within the Fed’s quiver to battle high joblessness. In a speech in Boston Friday, Bernanke said high joblessness is a scourge that could start feeding on itself by causing a debilitating cycle of deflation. Bernanke said that we need to consider inflation can be too low right now which is why limiting inflation as the Fed is doing may be a bad thing, accounts CNNMoney.com. In theory, quantitative easing–pumping more money into the economy–triggers inflation by weakening the dollar. Since 2008, the Fed hasn’t done much as nearly $2 trillion in assets have been bought.

How the idea of QE2 has affected the economy

The Nov 2-3 meeting is where buyers plan on listening to the QE2 announcement from the Fed. The Associated Press reports that since Bernanke started hinting that he would order such a move, anticipation of QE2 has profoundly impacted the economic system. Oil prices went up. They went up 10 percent too. Now Americans are paying millions more each and every week for gas. $400 million much more is being paid. $1,377.60 is the price of gold now. This is an 11 percent increase. Corn futures are up more than 30 percent. Since the 1950s, the average 30-year fixed mortgage hasn’t been this low as it is now at 4.19 percent. There was a .55 percent fall within the average rate of interest paid on a one-year certificate of deposit. The unemployment rate remained stuck near double digits.

Why QE2 can be gone very soon

Bernanke explained the QE2 had to help the economic system while he had been in Boston. Of course, a rise in positions and decrease in joblessness along with increased spending and a better corporate revenue are what you’d expect from a weak dollar and low rate of interest. CNN Money heard from Kevin Giddis of Morgan Keegan that since it has not worked yet, much more quantitative easing definitely will not help. “I do not think buying securities is going to pull the economic system out of a ditch,” he said. “The market isn’t purchasing it. We’ve made cash available freely for a when now. The Fed has to start thinking way outside the box. This is not a war where conventional weapons could be used.”

Articles cited

CNN Money

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

Associated Press

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