In a bold move Fed Chair Bernanke anounced an aggressive round of quantitative easing people are calling QE3. First this is a stimulus and with a GOPTEA House the only stimulus and the way it’s structured it could be a substantial stimulus. Make no mistake the QE measures in the past did as much to help the economy from going over the brink as the stimulus. `In fact in combination with low interest rates the quantitative easing by the Fed was probably the only thing that helped ease the foreclosure crisis.
Beyond that this quantitative easing is bold and unique. `For the fist time the Fed has left QE3 open ended. `Usually the Fed announces a specific amount it would spend to by things like mortgage securities. While the scope of QE3 is not as high in the beginning, the Fed will buy about $40 billion or so mortgage securities a month, obviously since it’s open ended it could help the economy greatly. The Fed agreed to purchase securities until the unemployment rate gets down to 7% or inflation goes over 3%. Bernanke also announced they will keep any adjustments to the discount rate to between 0-1/4% until the middle of 2015.
The short term political effects will be that QE3 has already caused the DJIA to go up over 200 points. Whether it helps the unemployment rate in the short term remains to be seen but at least it gives business the security to consider adding new hires.
The long term implications should be much more promising for whoever is the next president. Like I have predicted for a while the next four years will be a huge boon in economic growth no matter who is president because business just cannot sit on all those cash profits forever. The Fed move almost assures they must hire because it ends big businesses’ and finance’s last bogus reason to slow hiring and lending, economic insecurity. Since QE3 only ends with a positive result businesses will be compelled to meet those goals sooner or later. The bottom line is Bernanke who is one of the renouned experts in how to deal with depresive forces has just given American business and finance a security blanket instead of a short sheet.
To read more about QE3 click the following link.
Of course idiotic Republicans in the article are denouncing QE3 because it will help the economy. One was such a hypocrite they said QE3 was a result of Obama’s failures even though it’s the GOPTEA House that is blocking all jobs bills. I am sure the Nostradumbarses Libertarian types who have been predicting hyperinflation with every QE even though it cannot happen in times of low demand will squawk the loudest.
“There is no clearer indication than today’s Fed action that after 3 ½ years, the president’s economic policies continue to fail,” said Rep. Jeb Hensarling (R-TX), chair of the House GOP conference, in an official statement. “At a time of negative real interest rates and trillions in excess reserves, there is little which monetary policy can achieve today to promote economic growth and much the Fed risks by today’s announcement…. There are limits to what monetary policy can achieve, and it’s clear the Fed has reached them.”
Needless to say Democratic response was more positive.
“The Fed is fulfilling its obligation to take action to address unemployment,” said Sen. Chuck Schumer (D-NY). “Now congressional Republicans need to fulfill theirs.”