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A recent short Wall Street Journal article* included a chart that
simplistically shows what is said to be the essence of the economic thrust of quantitative easing. The chart, reproduced here, is worth studying and thinking about.
So says Ian R. Campbell
Lorimer Wilson, Managing Editor of www.munKNEE.com (Your Key to Making Money!), has edited the article below for length and clarity – see Editor’s Note at the bottom of the page. This paragraph must be included in any article re-posting to avoid copyright infringement.
Campbell goes on to say, in part:
In theory quantitative easing ought to be inflationary, given:
- the money printing required to enable the Federal Reserve to purchase assets generally thought to the be ‘less risky’ assets; and,
- as shown in the table below, with extra ‘money’ in the system, greater investment is expected in perceived ‘more risky’ assets with resultant job creation and GDP growth.
The best one can say for U.S. quantitative easing to date is that as a result of previous QE policies the American economy may be performing better now than it otherwise would be performing.
That said, things may be as simple as the American economy having been so structurally changed by the post-1995 globalization process that it can’t be brought back to anything approximating former levels – irrespective what supposed ‘solutions’ (QE being one of those) are ‘thrown at the wall’ to see ‘what will stick’.
Editor’s Note: The above post may have been edited ([ ]), abridged (…), and reformatted (including the title, some sub-titles and bold/italics emphases) for the sake of clarity and brevity to ensure a fast and easy read. The article’s views and conclusions are unaltered and no personal comments have been included to maintain the integrity of the original article.
*http://blogs.wsj.com/economics/2012/09/14/how-quantitative-easing-works/
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