Friday , 26 May 2017


How Quantitative Easing Supposedly Works in 1 Simple Chart

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 (www.StockResearchPortal.com) in paraphrased excerpts from one of the components of his subscription service** which is presented here with his kind permission for posting on www.munKNEE.com (Your Key to Making Money!). This paragraph must be included in any article re-posting to avoid copyright infringement.

 Lorimer Wilson, editor of www.FinancialArticleSummariesToday.com (A site for sore eyes and inquisitive minds) and 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/

**(The above is just one of many of Stock Research Portal’s daily commentaries, critiques, ‘Think for Yourself’ challenges and ‘Speak For Themselves’ World Headline summaries. Subscribe now to receive their full, unabridged newsletter.)

Related Articles:

1. Peter Schiff: QEternity Has Its Limits – Here’s Why

money printing

The latest round of quantitative easing (an additional $40 billion a month until conditions improve) has been dubbed as “QEternity” or  “QE-Infinity” by its critics but it will end much before that. We are witnessing a  massive bubble in US government debt, and we’ve reached the point where  no one in charge believes it will ever end – an excellent  contra-indicator. [Let me explain.] Words: 720

2. QE3 Will Be More Effective Than Previous Versions – Here’s Why

money printing

The analysis of current Fed policy has included the usual parade of mistaken pundits [whose views have] been obscured by… an agenda based upon their politics or their business models [and then there]…are the correct answers which are pretty obvious to anyone with any training in economics. Here is that reality. Words: 734

3. World’s Largest Economies Have NO Choice But to Engage in Massive Money Printing – Here’s Why

The choice facing the leaders of the world’s largest economies is a simple one: Either they engage in massive money printing, or they let the world slip into another great depression. This article examines why they have no choice but to print money, something which will have significant consequences for everyone. Words: 560

4. Continued Money Debasement Means More Unintended Consequences, Social Disorder & Further Debasement of Society – Here’s Why

money printing

I keep wondering to myself, do our money-printing central banks and their cheerleaders understand the full consequences of the monetary debasement they continue to engineer? [Below is what I think awaits us.] Words: 1013

5. QE3: Impact on Gold & Silver Returns Should Outshine Impact on Economic Growth – Here’s Why

crowne-gold-silver-bullion_l

While the Fed’s third round of quantitative easing is fairly aggressive it is unlikely to have a significant impact on the economy – especially if policymakers in Washington lead us over the fiscal cliff. Where QE3 may have an impact, however, is in the commodities market, and in particular gold. Here’s why. Words: 400