December 16, 2008
Limits of Monetary Policy and “Quantitative Easing”
One of the goals of this blog is to decipher some of the not-so-clever and confusing lingo that is economics. I read an article this morning by Ryan Sweet on the Dismal Scientist website that I thought did a good job in just two sentences of describing “Quantitative Easing.” I thought I would share it with you:
“Quantitative easing aims to bring down long-term interest rates and increase liquidity in the financial system. Under a quantitative monetary regime, the Fed would focus directly on the quantity of money in the system rather than on trying to influence the money supply indirectly through the price of credit—in other words, interest rates.”
This will be a popular topic for students of the Fed in 2009 — and a topic debated and most likely misunderstood by the media. We will try to explore it further through this blog.
I will leave you with a couple questions to consider: It may be wise to have a broad-based strategy to ease quantitatively from the beginning, such as buying corporate debt, equities, and long-term Treasuries, but do you see any problems with this strategy from the perspective of the Fed? What would you recommend and is there something in history that you could point to that would help guide policy-makers?
Posted by Cindy at December 16, 2008 3:37 PM
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Even though some sort of virus wiped out our conversation when this was posted, I thought I would post a URL from a recent article that our original commentators would have enjoyed in light of the conversation we had --http://news.yahoo.com/s/nm/20090302/us_nm/us_usa_fed_lacker
Posted by: Cindy at March 3, 2009 10:15 PM
I can't find how to subscribe to the comments via RSS . I want to keep on top of this, how do I do that?
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Posted by: seo at September 3, 2010 3:18 AM
Bank of England Governor Mervyn King says he's ready to resume quantitative easing if the UK economic recovery falters due to the incoming austerity measures. Wholly inappropriate IMO - you can't address an insolvency problem with liquidity.
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