A persistently moribund economic system has led Ben Bernanke to suggest that the Federal Reserve will resume quantitative easing, a policy known as QE2. Solely on the expectation the Fed will invest in additional Treasuries to flood cash into the system, the dollar is worth less, as are treasury yields, stocks are increasing and the price of oil, gold, silver and commodities for instance corn have increased. Joblessness, nevertheless, remains impervious to any stimulus, a condition the Fed suggests might be changed with more quantitative easing. Resource for this article - Fed hints at more quantitative easing despite its failure so far by Personal Money Store.
QE2 is the only way to cease deflation, Bernanke said
Having lowered interest rates to almost zero, quantitative easing is only arrow left in the Fed's quiver to battle high unemployment. In a speech in Boston Friday, Bernanke said high unemployment is a scourge that could start feeding on itself by causing a debilitating cycle of deflation. CNNMoney.com accounts that instead of focus on the Fed's traditional mission to limit inflation, Bernanke said it had been time to seriously consider that inflation is too low. Pumping much more money to the economy is a great thing then, called quantitative easing. This will make the economic system have much more money. Since 2008, the Fed has not done much as almost $2 trillion in assets have been bought.
The economy is changing with the thought of a QE2
Investors expect the Fed to announce QE2 at its Nov. 2-3 meeting. The economy has been changing a lot, accounts the Associated Press, even since Bernanke begun hinting that an order for QE2 might occur then. Oil prices went up. They went up 10 percent too. Americans are paying $400 million more a week for gas. An 11 percent increase in gold has happened making it rise to $1,377.60. Corn futures are up more than 30 percent. Since the 1950s, the average 30-year fixed mortgage has not been this low as it's now at 4.19 percent. The average rate of interest paid on a one-year certificate of deposit has fallen to .55 percent. The unemployment rate remained stuck near double digits.
Factors QE2 won't last
Bernanke talked about QE2 when in Boston. He said that the QE2 would help the economy greatly. Of course, a rise in positions and decrease in joblessness along with increased spending and a better corporate revenue are what you'd anticipate from a weak dollar and low rate of interest. CNN Money heard from Kevin Giddis of Morgan Keegan that since it hasn't worked yet, much more quantitative easing obviously will not help. "I do not think getting securities is going to pull the economy out of a ditch," he said. "The sector isn't purchasing it. We've made cash accessible freely for a while now. The Fed has to start thinking way outside the box. This is not a war where conventional weapons can be used."
Details from
CNN Money
money.cnn.com/2010/10/15/news/economy/bernanke_speech/?npt=NP1
Associated Press
google.com/hostednews/ap/article/ALeqM5hJprdjYORlZxJiFlMznIOBO7fs4A?docId=afebcea0bbfd4992bc5c4f9b46886f7c