Changes

In general, the Federal Reserve tries to stimulate the economy by lowering short-term interest rates.  However, when short-term interest rates are lowered to zero, the Federal Reserve turns to other less frequently used actions to with a goal of stimulating the economy. The Federal Reserve calls these "quantitative easing."  Basically, these involve the Federal Reserve purchasing longer-term bonds to lower the medium and long-term interest rates.

In general, the Federal Reserve tries to stimulate the economy by lowering short-term interest rates.  However, when short-term interest rates are lowered to zero, the Federal Reserve turns to other less frequently used actions to with a goal of stimulating the economy. The Federal Reserve calls these "quantitative easing."  Basically, these involve the Federal Reserve purchasing longer-term bonds to lower the medium and long-term interest rates.

There is no free lunch, so "quantitative easing" is always at someone's expense.  In general, although the economy may benefit from quantitative easing, the people who rely on bond interest income are harmed by their reduced income.

 

You can't accuse Federal Reserve Chairman Ben Bernanke of not living up to his nickname.  Back in 2002, Bernanke delivered a speech entitled "Deflation: Making Sure 'It' Doesn’t Happen Here" in which he referenced a statement by economist [[Milton Friedman]] about fighting deflation by dropping money from a helicopter.  Well, it might be time for a new nickname for Bernanke because what he did today was a lot more than drop money from a helicopter.  Today the Federal Reserve announced that QE3 will begin on Friday, but it is going to be much different from QE1 and QE2.  Both of those rounds of quantitative easing were of limited duration.  This time, the quantitative easing is going to be open-ended.  The Fed is going to buy 40 billion dollars worth of mortgage-backed securities per month until they have decided that the economy is in good enough shape to stop.  For those that get confused by terms like "quantitative easing" and "mortgage-backed securities", what the Federal Reserve is essentially saying is this: "We're going to print a bunch of money and buy stuff for as long as we feel it is necessary." In addition, the Federal Reserve has promised to keep interest rates at ultra-low levels all the way through mid-2015.  The course that the Federal Reserve has set us on is utter insanity.  Ben Bernanke can rain money down on us all he wants, but it is not going to do much at all to help the real economy.  However, it will definitely hasten the destruction of the U.S. dollar.<ref>[http://theeconomiccollapseblog.com/archives/qe3-helicopter-ben-bernanke-makes-it-rain-money QE3: Helicopter Ben Bernanke Unleashes An All-Out Attack On The U.S. Dollar]</ref>}}

==See also==

==See also==