10-09-2013, 07:05 PM
(10-09-2013, 12:35 PM)username Wrote: I should have known all that but I confess, I didn't. I knew I was in trouble when he said QE3 and I had no idea what he was talking about.
Learn something new everyday; I didn't know what QE3 meant until you referenced it and I looked it up in Investopedia:
"Quantitative easing" refers to steps that the U.S. Federal Reserve takes in attempting to boost the country's lagging economy. Historically, the Fed's main tool for spurring growth has been lowering short-term rates. However, QE employs expansionary monetary policy, which involves the purchasing of bonds when the interest rate can no longer be lowered.
In September of 2012, the Fed announced its third round of quantitative easing, often abbreviated to "QE3." The bank began buying mortgage-backed securities and Treasury bonds in late 2008 to curb mortgage rates and jumpstart the housing market. While many believe the efforts helped stop the economy's downward slide, anemic growth led to a second round of easing in 2010, followed by QE3 in 2012. This iteration involves the Fed buying an additional $40 billion in mortgage-backed securities each month until it sees improvement in the labor market.
The policy is not without its critics. Some economists note that previous easing measures have lowered rates but done relatively little to increase lending. With the Fed buying securities with money that it has essentially created out of thin air, many also believe it leaves the economy vulnerable to out-of-control inflation once the economy fully recovers.
Yellen's gonna have to decide whether to continue with the bond-buying strategy or scale back; been reading about that debate for awhile now.