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Quantitative Easing Explained

It’s worth it to watch the whole video.  Quite amusing and informative.

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Posted in Conspiracy, Economics, Markets, Media, Politics.

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5 Responses

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  1. NGB says

    I agree with the video and it is very funny. However I think what they say about deflation is completely wrong.

  2. Rimaye says

    No kidding. Try googling the term “deflationary spiral” or perhaps “Great Depression” and then tell me deflation is not bad.

    The Fed’s two mandates are to maintain full employment and price stability. How well it has done this historically is up for debate, but what is not up for debate is the fact that unemployment is out of control and inflation is near zero. Given that, it makes sense for the Fed to pursue QE.

  3. SurlyTrader says

    I agree with you both that deflation can be very bad, but on the flip side inflation can be very bad. The point being made is that prices on some goods are increasing (commodities/food) while the prices on what the Fed wants to increase (housing/commercial real estate) are not reacting. The Fed will not be happy until inflation kicks into housing prices which relieves the pressure on the banks and the financial system as a whole. The catch is that all other asset prices might react more strongly so the only people/institutions/governments who will truly benefit are those with large debt burdens. Steal from the savers and give to the debtors is the current remedy. Also, there is a pretty strong argument that by inflating asset prices we are just creating another asset price bubble which will lead us into the next crisis. Damned if you do, damned if you don’t.

Continuing the Discussion

  1. Inflation Explained | SurlyTrader linked to this post on April 15, 2011

    […] you enjoyed Quantitative Easing, you will definitely enjoy this entertaining and educational […]

  2. Fed: Out of Powder | SurlyTrader linked to this post on September 19, 2011

    […] Federal Reserve has run out of potential actions, that is why we are seeing the use of “quantitative easing” and other measures of effectively printing money without stating it.  With a short term […]

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