Changes

'''Quantitative Easing''' is the controversial use of gimmicks by the [[Federal Reserve]] to try to encourage [[economic growth]] during a [[recession]].  It consists of buying up longer-term [[bonds]] in an indirect effort to lower medium and long-term [[interest rates]]. So, the Federal Reserve shifts its portfolio of [[asset]]s from overnight and short term [[loans]] to holding more long-term bonds.

'''Quantitative Easing''' is the controversial use of gimmicks by the [[Federal Reserve]] to try to encourage [[economic growth]] during a [[recession]].  It consists of buying up longer-term [[bonds]] in an indirect effort to lower medium and long-term [[interest rates]]. So, the Federal Reserve shifts its portfolio of [[asset]]s from overnight and short term [[loans]] to holding more long-term bonds.

It is an economic [[monetary policy]] in which the total [[money supply]] is increased by the [[Federal Reserve]] buying government [[Treasury bond]]s. The goal is to encourage private [[bank]] to lend more and help reduce the effects of an economic recession. Quantitative easing was first used by [[Japan]] in 2000 to fight a [[deflationary]] economy. The 2010 and 2011 actions of Federal Reserve Chairman [[Ben Bernanke]] is to buy U.S. [[government bond]]s, with [[national debt|borrowed money]], to help ease America's declining financial statistics. By creating more dollars out of thin air, the dollar becomes devalued with the existing money supply versus other [[currencies]]. This policy of creating additional money to give to banks so that they lend more is highly questionable. The banks were largely responsible for the [[Great Recession]] and the increased money for banks have failed to produce the desired effect even after the [[Central Bank]]'s $1.7 trillion purchase. The short term gains are minimal and in the long term, this will eventually lead to higher prices and inflation or even hyper-inflation. <ref>[http://blogs.forbes.com/charleskadlec/2011/02/22/higher-inflation-is-on-the-way/ Higher [[Inflation]] Is On The Way, [[Forbes]].com, February 22, 2011]</ref>

It is an economic [[monetary policy]] in which the total [[money supply]] is increased by the [[Federal Reserve]] buying government [[Treasury bond]]s. The goal is to encourage private [[bank]] to lend more and help reduce the effects of an economic recession. Quantitative easing was first used by [[Japan]] in 2000 to fight a [[deflationary]] economy. The 2010 and 2011 actions of Federal Reserve Chairman [[Ben Bernanke]] is to buy U.S. [[government bond]]s, with [[national debt|borrowed money]], to help ease America's declining financial statistics. By creating more dollars out of thin air, the dollar becomes devalued with the existing money supply versus other [[currencies]]. This policy of creating additional money to give to banks so that they lend more is highly questionable. The banks were largely responsible for the [[Great Recession]] and the increased money for banks have failed to produce the desired effect even after the [[Central Bank]]'s $1.7 trillion purchase. The short term gains are minimal and in the long term, this will eventually lead to higher prices and inflation or even hyper-inflation.<ref>[http://blogs.forbes.com/charleskadlec/2011/02/22/higher-inflation-is-on-the-way/ Higher [[Inflation]] Is On The Way, [[Forbes]].com, February 22, 2011]</ref>

== Destruction of capital for investment and a cause of malinvestments ==

== Destruction of capital for investment and a cause of malinvestments ==

In May of 2012 Chris Ferreira wrote:  

In May 2012 Chris Ferreira wrote:  

{{cquote|When the majority of people are depositing their savings into banks and contributing to a high savings rate for their country, this creates an environment of higher levels of cash reserves in banks: in other words,  a nation of savers creates a situation where banks have enough capital to lend for new business ventures. As part of normal supply and demand characteristics in a free-market, lower interest rates will be adjusted to loan out this extra savings in deposits. In this case, interest rates fall in order to provide incentives to loan out money. In turn, the investment horizon for this capital is longer term and is primarily used to finance capital projects (“high orders”) and away from producing consumer goods (“low orders”). When all the excess savings in the bank are loaned out, the banks are operating at their minimum reserve requirements; interest rates then naturally increase to account for the shortage of savings in deposits, since the excess supply of money has been exhausted though loans...

{{cquote|When the majority of people are depositing their savings into banks and contributing to a high savings rate for their country, this creates an environment of higher levels of cash reserves in banks: in other words,  a nation of savers creates a situation where banks have enough capital to lend for new business ventures. As part of normal supply and demand characteristics in a free-market, lower interest rates will be adjusted to loan out this extra savings in deposits. In this case, interest rates fall in order to provide incentives to loan out money. In turn, the investment horizon for this capital is longer term and is primarily used to finance capital projects (“high orders”) and away from producing consumer goods (“low orders”). When all the excess savings in the bank are loaned out, the banks are operating at their minimum reserve requirements; interest rates then naturally increase to account for the shortage of savings in deposits, since the excess supply of money has been exhausted though loans...

Construction and real estate are two of the main beneficiaries of capital good investments when interest rates are low. The inverse applies for high interest rates, as more capital is spent on a shorter-term vision on consumer goods and away from capital goods.<ref>[http://www.economicreason.com/canadahousingbubble/effects-of-low-interest-rates-part-2/ Effects of low interest rates]</ref>}}

Construction and real estate are two of the main beneficiaries of capital good investments when interest rates are low. The inverse applies for high interest rates, as more capital is spent on a shorter-term vision on consumer goods and away from capital goods.<ref>[http://www.economicreason.com/canadahousingbubble/effects-of-low-interest-rates-part-2/ Effects of low interest rates]</ref>}}

==See Also==

==See also==

* [[National debt]]: [[Federal Reserve System]]'s [[Ponzi scheme]] of [[Quantitative easing]]-[[Debt monetization]] [[devaluation]] of [[Fiat currency]] through [[Money supply]]-[[Treasury bill]]s bought mostly by [[China]] and [[Japan]]

* [[National debt]]: [[Federal Reserve System]]'s [[Ponzi scheme]] of Quantitative easing-[[Debt monetization]] [[devaluation]] of [[Fiat currency]] through [[Money supply]]-[[Treasury bill]]s bought mostly by [[China]] and [[Japan]]

* [[Obamanomics]]: [[Obamunism]] [[Economic planning]] of the [[Obama administration fiscal policy]], [[Obama administration monetary policy]], [[Obamacare]], [[Federal funding]] via [[Crony capitalism]] ([[Obama donor list]]), [[Deficit spending]], [[Similarities between Communism, Nazism and liberalism]], [[Obamageddon]]

* [[Obamanomics]]: [[Obamunism]] [[Economic planning]] of the [[Obama administration fiscal policy]], [[Obama administration monetary policy]], [[Obamacare]], [[Federal funding]] via [[Crony capitalism]] ([[Obama donor list]]), [[Deficit spending]], [[Similarities between Communism, Nazism and liberalism]], [[Obamageddon]]

==References==

==References==

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[[Category : Economic Preparedness]]

[[Category:Economic Preparedness]]

[[Category:Economics]]

[[Category:Economics]]