New York Post: Fed's Back Printing Money - So What Gives?
Article by John Crudele in New York Post
Although there’s been no official announcement, the Federal Reserve has restarted QE — better known as Quack Economics.
You might know it better as Quantitative Easing, in which the central bank buys large amounts of government bonds or other assets to help stimulate the economy. There have been three of these QEs since the financial crisis more than 10 years ago. But the big question now: Is there a new crisis that has the Fed dusting off QE?
The Fed isn’t saying.
QE is simple to understand even though economists gave it a sophisticated name. Here’s how it works: The Fed electronically prints trillions of dollars in extra money, which it uses to purchase bonds and other securities.
This was supposed to keep interest rates low. And the low interest rates were supposed to help the economy grow. Once the economy got going, the Fed was supposed to stop printing money. The economy would then stand on its own.
I used the phrase “supposed to” a number of times because QE didn’t quite live up to expectations. And there have been many vocal critics — myself included — who have argued that QE was just another version of the age-old money-printing schemes that have created enormous inflation problems in the past.
If you print too much money, then prices are bound to go up. And once prices start rising, the possibility of unchecked inflation becomes very real.
Let’s say, for instance, that you have $200 in your household budget for groceries, and you’ve been making do with that amount. Suddenly the price of food rises 10 percent, 20 percent or 30 percent because there is too much money chasing the same amount of goods.
The cost of things is as important to your family as the amount of money you earn.
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