Quantitative Easing
The Quantitative Easing Binge
10/09/09 17:33
This is a good article by Karl Schamotta, Market
Analyst at Custom House where he answers
a question on Quantitative Easing.
The Quantitative Easing Binge
This week, one of our readers wrote in to ask about the long-term implications of quantitative easing programmes on currency and financial markets. This is a great question—the world economy has been on a monetary policy binge for the last year, and while we don’t have a lot of historical precedent to help us understand the consequences, the impact is likely to be large. Even in this day and age, numbers in the trillions are very substantial.
With fear and uncertainty dominating financial markets last year, investors and lenders around the world collectively put their money under their mattresses. Without any money circulating, there was a very real danger that the global economy would slow catastrophically. In response to these rapidly deteriorating conditions, governments started the printing presses and threw money into bailouts and infrastructure projects to support the underlying economy. In addition to these efforts in the real economy, central banks began putting money into the financial system, dropping interest rates to near zero and implementing the measures that have become known as quantitative easing. Read More...
The Quantitative Easing Binge
This week, one of our readers wrote in to ask about the long-term implications of quantitative easing programmes on currency and financial markets. This is a great question—the world economy has been on a monetary policy binge for the last year, and while we don’t have a lot of historical precedent to help us understand the consequences, the impact is likely to be large. Even in this day and age, numbers in the trillions are very substantial.
With fear and uncertainty dominating financial markets last year, investors and lenders around the world collectively put their money under their mattresses. Without any money circulating, there was a very real danger that the global economy would slow catastrophically. In response to these rapidly deteriorating conditions, governments started the printing presses and threw money into bailouts and infrastructure projects to support the underlying economy. In addition to these efforts in the real economy, central banks began putting money into the financial system, dropping interest rates to near zero and implementing the measures that have become known as quantitative easing. Read More...