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The new round of quantitative easing in the U.S. is becoming a reality

Published: Sat, 09/15/2012 - 22:15
By: admin

September of the current year may go down in history as the start of the third round of quantitative easing, the economy. In turn, the measure of economic growth could be the last step to the U.S. economic and geopolitical disaster.

 

Why quantitative easing threatens the economy of the United States? To answer this question we must understand the terms. Quantitative easing is a repurchase program of various financial assets from the market (mostly government debt or corporations). During the redemption Fed is pumping money into the financial system means that go on lending to companies and individuals.

 

Stimulate lending leads to higher consumption and investment, which creates conditions for the acceleration of economic development. The first round of quantitative easing in the U.S. has had limited effectiveness. They stopped the decline of the economy and stabilize the housing market. However, the monetary stimulus has not helped improve the situation in the U.S. labor market. In addition, quantitative easing does not solve the structural problems in the economy, associated with the growth of national debt.

 

The third round of quantitative easing will not just be of limited effectiveness, and threatens the stability of the U.S. financial system. This is because the Fed is planning to go on an indefinite debt repurchase program from the market.

 

Uncontrolled injection of liquidity into the financial system will have a positive impact on the labor market in the short to medium term. But in the long term it will lead to a sharp acceleration of inflation. Since monetary stimulus does not increase the productivity and efficiency of business, inflation will rise in the context of low or zero growth rate of GDP (this phenomenon is called stagflation).

 

Stagflation will lead to a sharp drop in income the U.S. for 3-5 years. As the world's largest economy depends on consumer spending, stagflation replaced full recession. U.S. will lose influence on geopolitical developments, and U.S. companies will lose their position in world markets. Thus, the third round of quantitative easing in the U.S. can not be considered useful for the State.