Quantitative easing is a monetary policy tool used by a central bank to try and stimulate an economy when the economic cycle is far below optimum levels. Central banks increase the quantity of money in the financial system through quantitative easing by purchasing securities, such as treasury bonds, to increase the price of assets; this will lower prevailing yields and entice investors into other areas that might be more beneficial for an economic rebound. One worry with quantitative easing is that the increase in the supply of money might lead to inflation, or the overall increase in the price of goods.
Ask even an amateur economist, and they will tell you this: an increasing money supply eventually leads to inflation. It’s a simple concept; the more paper money there is in the system, the less it’s worth and the less it buys.
And this is exactly what is happening in the U.S. economy. The money supply is growing at a fast rate when compared to historical averages…. Read More
It’s finally over…
The quantitative easing programs initially started by the Federal Reserve six years ago are (for now) history.
In its statement on October 29, the Federal Reserve said, “Accordingly, the Committee decided to conclude its asset purchase program this month.” (Source: “FOMC Statement,” Federal Reserve, October 29, 2014.)
The reason for ending the quantitative easing: “The Committee judges that there has been a substantial improvement in the outlook for the labor market since the inception of its current asset purchase program…. Read More
The chart below shows us that between April and August of this year, home prices in the U.S. declined. The S&P Case-Shiller Home Price Index is only released 60 days after each month’s end, so while data for September and October are not yet available, based on what I’m about to tell you, five years after the Great Recession, the U.S…. Read More
According to research by UC Berkeley, in 2012, the top one percent of income earners in the U.S. earned 22.5% of all the income. The bottom 90%, on the other hand, earned less than 50% of all the income. (Source: Pew Research Center, January 7, 2014.) Income inequality in the U.S. economy is the highest it has been since 1928. The rich are getting richer, and the poor are seeing their share of income decline…. Read More
It’s widely expected that at the end of this month, the Federal Reserve will end its third round of quantitative easing (that began in September of 2012). This is QE3, where the Federal Reserve was printing $85.0 billion of new money every month and using it to buy U.S. Treasuries and mortgage-backed securities (MBS). In the beginning of 2014, the Fed started reducing the amount of money it was printing each month…. Read More