The Fed Launched QE2 Lead to Bad Results of the Three
- By Himfr Mary
- Published 02/4/2012
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Himfr Mary
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Federal Reserve early November launch of the second round of "quantitative easing" policy (QE2), the point is to maintain the level of 0-0.25% interest rate under the conditions of the end of June next year before the purchase of 6000 billion U.S. dollars in long-term debt. Previously, the Fed launched in late 2008 QE1, expected rounds of "quantitative easing" spent a total of over 23,000 billion U.S. dollars.
The introduction of the Federal Reserve QE2 caused uproar around the world. In order to stimulate the U.S. economy, increase employment and to the global water, time, ingenious - scheduled for mid-term elections, the intention is obvious: an attempt to minor in political economy. It's wishful thinking to achieve it? I do not see that simple, the consequences could have three.
One is selfish. The expense of others is positive. "Quantitative easing" appears to be the United States "own business", in essence, is a "beggar thy neighbor" policy of currency depreciation. The consequences are excessive liquidity will lead to rampant U.S. dollar, the impact of hot money market, exchange rate volatility, lead to global inflation and asset bubbles and inflation expectations, and the impact of the independence of monetary policy, other countries, exacerbating global "currency war" and "Trade war ", confuse the international financial order, fight against the global economic recovery. This is the loss of the human dimension.
America's own self-interest aspect is the desire to stimulate their economies, but also the needs of the general election. The first three quarters, the U.S. GDP growth tends to narrow down the chain; the end of last October, the unemployment rate for 18 months stay in about 10% in 26 years the most serious one; consumer credit have more than 26 months of the ring than the negative ( zero) growth, consumer confidence is difficult to recover. In this case, the United States hopes QE2 might be able to stimulate the economy in the short run and employment can be salvaged that Obama or the political initiative, this once again take the risk.
The second is that dog in the manger. QE2 is a "strong medicine", but not necessarily "good medicine." The problem is that U.S. companies are now reluctant to borrow, banks are reluctant to lend. Three major issues the U.S. economy: weak consumption, the lack of investor confidence, high unemployment, the fundamental reason is not the size of the money supply, but rather deep-seated social and economic structure of deteriorating fundamentals, the destruction of the financial order, not to effect a permanent cure , driven by the quantity of money alone, may be just wishful thinking on political, or tactical deceive the public.
Friedman monetary policy as an analogy said, "You can horse to the river, but not forcing it to drink water." Cairns also said: "You can not push a rope (the rope is pulled)," the U.S. money supply is in use to this rope, "promote" recovery and employment, can be described as forest for the trees, damaged others, not self-serving.
A third possibility is harmed themselves and others. To further pointed out that in the long run QE2 may be quenching thirst with poison, both loss of human and sinful. "Harming
others" has two aspects, one of the inflation expectations of economic recovery has been normal, but the majority of the rise of emerging countries and regions, the same fuel; the second is trying to imitate others in Japan, the United Kingdom and a few other countries will follow other people eat the wrong medicine.
"Tampering" at least three areas, one over-indebtedness, the U.S. federal budget will be difficult; two long-term depreciation of the dollar, "currency leader" shake the foundation status; third is the U.S. government is unjust policy for quite some time, must have suffered "scant support" a hard time.
The reason may be the consequences of these three, cover due to the profound crisis in the United States and the duality of the world economy. Duality of the current most important are two points:
First, the duality of the recovery. The international financial crisis, countries in the economic recovery process to differentiate into two camps: the United States, Europe, Japan, represented by the developed countries, the recovery is still facing great uncertainty, and with some degree of deflation; and to China, India, represented by the emerging market countries, the recovery trend of the basic set, facing the pressure of inflation or inflation expectations. The duality of the recovery may QE2 a consequences.
Second, the duality of the dollar. U.S. only U.S. currency, is an international currency, this duality determines the dollar liquidity is difficult to co-existence and stability. Fulfill the dual responsibility of the United States, but set the expense of others, both the current international monetary system exposed the inherent contradictions, but also contributed to a very adverse international financial culture.
In the context of this duality, QE2 it is inevitable consequences of the three, the difference is that different stages have different performance. May be some short-term "self-interest," the illusion of the mid-show "dog in the manger," the plight of the long term, will fall into the "harmed themselves and others" quagmire.
Current macroeconomic face many "dilemma", the Fed's policy has made us even more difficult, how to solve nothing less than the two strokes, one flat strokes, one stroke risk, style all their own. Trick trick is a steady level, no big deal, but does not solve the problem, up until a dangerous move that may solve the problem, but it is risky.
The United States is the first presidential election, China is stable first. So here only to talk about peace move. Ping is nothing less than three strokes: one vertical and horizontal, close contact with emerging economies, seeking common ground while reserving differences, to defend common interests among euro-zone countries actively seek to strengthen political coordination, mutual benefit.
The second is to actively resist, to strengthen the management of capital projects, and actively build a firewall, improve the RMB exchange rate formation mechanism, grasp the initiative in the exchange rate, a good two-way control fluctuations in the timing, magnitude and rhythm.
Third, self-improvement, and improve monetary policy instruments to enhance the effectiveness of monetary policy; strengthen the total amount of foreign exchange reserves management and structural adjustment, reduced passive and increase initiative. These words is easy, done, improper leading a poor family you do not know, for reference only.
The introduction of the Federal Reserve QE2 caused uproar around the world. In order to stimulate the U.S. economy, increase employment and to the global water, time, ingenious - scheduled for mid-term elections, the intention is obvious: an attempt to minor in political economy. It's wishful thinking to achieve it? I do not see that simple, the consequences could have three.
One is selfish. The expense of others is positive. "Quantitative easing" appears to be the United States "own business", in essence, is a "beggar thy neighbor" policy of currency depreciation. The consequences are excessive liquidity will lead to rampant U.S. dollar, the impact of hot money market, exchange rate volatility, lead to global inflation and asset bubbles and inflation expectations, and the impact of the independence of monetary policy, other countries, exacerbating global "currency war" and "Trade war ", confuse the international financial order, fight against the global economic recovery. This is the loss of the human dimension.
America's own self-interest aspect is the desire to stimulate their economies, but also the needs of the general election. The first three quarters, the U.S. GDP growth tends to narrow down the chain; the end of last October, the unemployment rate for 18 months stay in about 10% in 26 years the most serious one; consumer credit have more than 26 months of the ring than the negative ( zero) growth, consumer confidence is difficult to recover. In this case, the United States hopes QE2 might be able to stimulate the economy in the short run and employment can be salvaged that Obama or the political initiative, this once again take the risk.
The second is that dog in the manger. QE2 is a "strong medicine", but not necessarily "good medicine." The problem is that U.S. companies are now reluctant to borrow, banks are reluctant to lend. Three major issues the U.S. economy: weak consumption, the lack of investor confidence, high unemployment, the fundamental reason is not the size of the money supply, but rather deep-seated social and economic structure of deteriorating fundamentals, the destruction of the financial order, not to effect a permanent cure , driven by the quantity of money alone, may be just wishful thinking on political, or tactical deceive the public.
Friedman monetary policy as an analogy said, "You can horse to the river, but not forcing it to drink water." Cairns also said: "You can not push a rope (the rope is pulled)," the U.S. money supply is in use to this rope, "promote" recovery and employment, can be described as forest for the trees, damaged others, not self-serving.
A third possibility is harmed themselves and others. To further pointed out that in the long run QE2 may be quenching thirst with poison, both loss of human and sinful. "Harming
"Tampering" at least three areas, one over-indebtedness, the U.S. federal budget will be difficult; two long-term depreciation of the dollar, "currency leader" shake the foundation status; third is the U.S. government is unjust policy for quite some time, must have suffered "scant support" a hard time.
The reason may be the consequences of these three, cover due to the profound crisis in the United States and the duality of the world economy. Duality of the current most important are two points:
First, the duality of the recovery. The international financial crisis, countries in the economic recovery process to differentiate into two camps: the United States, Europe, Japan, represented by the developed countries, the recovery is still facing great uncertainty, and with some degree of deflation; and to China, India, represented by the emerging market countries, the recovery trend of the basic set, facing the pressure of inflation or inflation expectations. The duality of the recovery may QE2 a consequences.
Second, the duality of the dollar. U.S. only U.S. currency, is an international currency, this duality determines the dollar liquidity is difficult to co-existence and stability. Fulfill the dual responsibility of the United States, but set the expense of others, both the current international monetary system exposed the inherent contradictions, but also contributed to a very adverse international financial culture.
In the context of this duality, QE2 it is inevitable consequences of the three, the difference is that different stages have different performance. May be some short-term "self-interest," the illusion of the mid-show "dog in the manger," the plight of the long term, will fall into the "harmed themselves and others" quagmire.
Current macroeconomic face many "dilemma", the Fed's policy has made us even more difficult, how to solve nothing less than the two strokes, one flat strokes, one stroke risk, style all their own. Trick trick is a steady level, no big deal, but does not solve the problem, up until a dangerous move that may solve the problem, but it is risky.
The United States is the first presidential election, China is stable first. So here only to talk about peace move. Ping is nothing less than three strokes: one vertical and horizontal, close contact with emerging economies, seeking common ground while reserving differences, to defend common interests among euro-zone countries actively seek to strengthen political coordination, mutual benefit.
The second is to actively resist, to strengthen the management of capital projects, and actively build a firewall, improve the RMB exchange rate formation mechanism, grasp the initiative in the exchange rate, a good two-way control fluctuations in the timing, magnitude and rhythm.
Third, self-improvement, and improve monetary policy instruments to enhance the effectiveness of monetary policy; strengthen the total amount of foreign exchange reserves management and structural adjustment, reduced passive and increase initiative. These words is easy, done, improper leading a poor family you do not know, for reference only.
