Quantatative Easing is unconventional monetary policy used by some central banks with the aim of decreasing long term interest rates. QE increases the supply of money by creating money which is then used for increasing the excess reserves of the banking system, generally through buying of the central government's own bonds to stabilize or raise their prices and thereby lower their yield. Federal Reserve of U.S is now working on the 2nd round of Quantatative Easing, which will stimulate the economy even more because the 1st stimulus did not work as much as expected. The Fed believes that QE2, which would involve massive purchases of Treasuries, would push yields on Treasuries and bonds down and produce a surge in investment and consumption expenditures.
QE2 has a goal, to raise the economy's inflation to 2~4%. Federal Reserve inflationary policies are apparently poised to sweep us up, up, and away until, that is, the balloon bursts once again. Because of this, many domestic investments are likely to be made. More investments, more factors of production, and more domestic products. Because QE2 supplies more money and increases supply of dollars, the value might go down. Which means, the China's export will earn more than now. Because Renminbi is highly regulated by Chinese government, and because G20 failed to stop this manipulation by Chinese Government, Renminbi will not change in value. But since the dollar value goes down, Renminbi gains less power than before. For example, if 1 Renminbi changes to 1 dollar in U.S, now 1 Renminbi which changes to 2 dollar in U.S. after the inflation and QE2. Because dollar value goes down, Chinese exporters are damaged. They have to increase their price to get the same profit in Renminbi. The imports from China, therefore, will likey decrease.
However, American exporters face a different side. Since dollar can change into more Renminbi, American entrepreneurs can establish and gain more profit in the Chinese market.
By proposing and operation QE2, American businesses gain more advantage on domestic and international market. In Domestic market, cheaper American products compete against more expensive Chinese products. In international market, American industries can gain so much more revenue with less investments. In conclusion, QE2 will encourage domestic products, which will have increased demand because of lower price, lower unemployment rate, and possibly end of recession, while successfully exploiting the Chinese market also, with less investments and higher revenue.
http://www.csmonitor.com/Business/ThinkMarkets/2010/1018/What-s-this-QE2-all-about
http://en.wikipedia.org/wiki/Quantitative_easing
http://blogs.wsj.com/economics/2010/11/03/qa-on-qe2-what-a-fed-move-would-mean/
http://www.smartmoney.com/investing/economy/why-qe2-isnt-the-answer/
Further Question: What is economic benefits of China's economic boom in U.S?
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