How More QE Affects the Economy
Federal Reserve Chairman Ben Bernanke's Congressional testimony this week was closely watched -- not for his comments on the economy or tax reform, but for hints he might suggest additional monetary stimulus. Instead, he repeated the same line he's been repeating for months: the Fed is prepared to do more if it has must, but nothing needs to be done right now.
So, under what circumstances would another round of quantitative easing be most effective? There are several ways QE could help a flagging economy: preventing deflationary expectations, directly increasing nominal demand through money creation, lowering interest rates, therefore encouraging borrowing, and touching off a consumer mortgage-refinancing wave. In the right circumstances, these are all good reasons for a central bank to engage in non-traditional monetary policy. The question is, are any of these relevant in the U.S. today?...897 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.
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