Mr/Ms. ILG:
If you google news on "Quantitative Easing" you might find what Mr. Deacon Blues is trying to reference. To the non-economist,
quantitative easing, may appear to "printing more money", however, that would be an ill-informed rudimentary explanation.
Quantitative easing, can be defined as "the
creation of a pre-determined quantity of new money 'out of thin air'
[1] through
open market operations by a
central bank as the start of a process to increase the
money supply. It can, more simply, be understood as an indirect method of printing money. This new money is injected into the
private banking system when the accounts of the vendors of the securities purchased by the central bank through the open market operations are credited."
Here is a Wiki article that I hope will provide some background knowledge about the theory behind the Feds and Bernake's latest attempt to buy some time for our stagnating economy.
Also here is a youtube video that explains the practice.
http://www.youtube.com/watch?v=ohKQP_wSO9k
Although, I agree with Mr. Blues that this is unprecedented in the U.S. and has an element of risk to creating hyperinflation; by definition it is an attempt to manipulate the "free market" by combating
deflation, a problem the U.S. economy is facing. The Fed, as you may or may not know, already has it's hands in the open markets operations controlling interest rates.
It should be noted that Japan, England and the EU have utilized quantative easing in the recent past. Data is still being assessed concerning the effectiveness of this practice; some say it has helped, others say it has had a negative effect. while others say the effect is dependent of other factors.
Moreover, I do not think Mr. Blues reactionary historical comparisons of this practice are directly analogous to the actual printing of money by the Weimar Republic, post WWII, for many reasons. One reason is because this is not direct printing and another is the scope.
Germany went through its worst inflation in 1923. In 1922, the highest denomination was 50,000 Mark. By 1923, the highest denomination was 100,000,000,000,000 Mark. In December 1923 the exchange rate was 4,200,000,000,000 Marks to 1 US dollar.In 1923, the rate of inflation hit 3.25 × 106 percent per month (prices double every two days). Beginning on November 20, 1923, 1,000,000,000,000 old Marks were exchanged for 1
Rentenmark[14] so that 4.2 Rentenmarks were worth 1 US dollar, exactly the same rate the Mark had in 1914. (Wiki)
Mr. Blues' alarmist view seems to prevail and be endemic among those who have jumped on the fatalistic agenda-filled "trainwreck" bandwagon.
Linear Mode
