What is "Quantitative Easing"? Discuss the latest "QE2" measure Federal Reserve bank chairman Ben Bernanke is taking. What is his stated purpose? Why is it so controversial? According to your research, what are the possible outcomes of this action (list at least 3 pros and 3 cons).
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Quantitative easing or "QE2 is a monetary policy that is used by some central Banks to increase the supply of money The method of " quantitative easing is that the government buys up its own bonds to increase the supply of money. The point is that this is a method of last resort. This method is used when normal methods of increasing the supply of money like the reducing bank interest rate, discount rate, or the intern bank interest rate have failed and are close to zero.
The Federal Reserve Bank has a history of using " quantitative easing. When the current economic weakness started in 2008, the fed used quantitative easing to counter the recession. The point is that the FED carries out open market transactions to increase the cash with the banks. The Fed purchases financial assets from the market including government bonds, company bonds, mortgage-backed securities, and agency debt. These purchases give the excess reserves the banks require to create new money and stimulate the economy. During the year 2009 the Fed used to accept treasures and any safe ...
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