The Fed's Next Round of Quantitative Easing
The Great Recession is technically over according to certain economists. Don't believe them? Think everything is still a financial disaster? Well, apparently the Federal Reserve agrees with MSC-112you. The Fed appears to be leaning towards a second round of quantitative easing. Oh, my.
Let's consider how recessions usually work. They hit the economy when most people are oblivious to the prospect of them. They then last for a year or two. Like a fight with your lover, once they are over things get hot and heavy real quick. The stock market typically booms and the economy grows at a robust pace and creates lots and lots of jobs.
As you've probably noticed, the "recover" from the Great Recession hasn't worked out this way. This is because we haven't really had a recovery. Instead, we've simply flattened out. While this is better then continuing to circle the proverbial economic drain, it isn't returning things to normal.
The question is what will the next move be? Will the recovery pick up pace and get the economy humming again or will we have a double dip that will do untold damage. Every Tom, Dick and Harry has an opinion including myself. Ignore them. Instead, follow the 005-002money and, in this case, that means the Federal Reserve Bank.
The Fed clearly thinks we are in trouble. It is making noises about a second round of quantitative easing. This is a euphemism for creating money out of thin air. The idea is to buy up debt and support the economy to give it time to recover. Yeah, that is the ticket! The fact it didn't exactly work the first time around apparently isn't a big deal to the powers that be.
What does this new round of quantitative easing mean to you? It should mean fear. Consider this; the Fed is already the second biggest buyer of the debt instruments of our government. [Yes, a quasi government bank is buying government debt!] Now it is printing what will ultimately be trillions of dollars out of thin air. This means two things - the devaluation of the dollar and a massive surge of inflation at some point. Many would argue these are the same things, but it doesn't really matter.
The overall state of the economy in the United States is006-002 frankly, fairly appalling. Without government intervention, it is scary to think how much worse the last two years would have been. Now that the government appears to be running out of cards it can play in this game, we might just find out how bad it truly is going to get.
I hope not, but it doesn't look good.
Let's consider how recessions usually work. They hit the economy when most people are oblivious to the prospect of them. They then last for a year or two. Like a fight with your lover, once they are over things get hot and heavy real quick. The stock market typically booms and the economy grows at a robust pace and creates lots and lots of jobs.
As you've probably noticed, the "recover" from the Great Recession hasn't worked out this way. This is because we haven't really had a recovery. Instead, we've simply flattened out. While this is better then continuing to circle the proverbial economic drain, it isn't returning things to normal.
The question is what will the next move be? Will the recovery pick up pace and get the economy humming again or will we have a double dip that will do untold damage. Every Tom, Dick and Harry has an opinion including myself. Ignore them. Instead, follow the 005-002money and, in this case, that means the Federal Reserve Bank.
The Fed clearly thinks we are in trouble. It is making noises about a second round of quantitative easing. This is a euphemism for creating money out of thin air. The idea is to buy up debt and support the economy to give it time to recover. Yeah, that is the ticket! The fact it didn't exactly work the first time around apparently isn't a big deal to the powers that be.
What does this new round of quantitative easing mean to you? It should mean fear. Consider this; the Fed is already the second biggest buyer of the debt instruments of our government. [Yes, a quasi government bank is buying government debt!] Now it is printing what will ultimately be trillions of dollars out of thin air. This means two things - the devaluation of the dollar and a massive surge of inflation at some point. Many would argue these are the same things, but it doesn't really matter.
The overall state of the economy in the United States is006-002 frankly, fairly appalling. Without government intervention, it is scary to think how much worse the last two years would have been. Now that the government appears to be running out of cards it can play in this game, we might just find out how bad it truly is going to get.
I hope not, but it doesn't look good.
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