Quantitative easing

This is a term we may hear a lot more of in the coming days since it is a last ditch method of dealing with debt when a nation is skint.   It is where a nation puts more money into the economy.  The US Federal Reserve has done some quantitative easing by purchasing $600 billion of U.S. Treasury securities.   I’m not sure if quantitative easing is more like counterfeiting or cheque kiting: both of which are ways anyone other than the official national bank spends nonexistant money.   Another problem is that quantitative easing is an extremely short term fix which is as useful as counterfeiting or cheque kiting.

You too can be a billionaire in hyperinflated currency!

The problem is that the world economy is based upon debt, but everyone is pretty much in debt up to their eyeballs.  The Fed wants to revive the debt cycle which the world economic system is based upon. The Fed believes that if it can get more money into the banking system, the banks will turn around and make more loans. Unfortunately, this is a misinformed concept since everyone is pretty much in debt up to their eyeballs. The banks want to get solvent again and anyone else who can pay down their loans is trying to do that as well. The economy is tanking as Charles Hugh Smith recently explained:

Anyone who believes a meager one or two trillion dollars in pump-priming can overcome $15-$20 trillion in overpriced assets and $10 trillion in uncollectible debt may well be disappointed.

In fact, economists over at Goldman Sachs estimate that it would take a staggering $4 trillion in quantitative easing to get the economy rolling again. But one problem with quantitative easing is that it can lead to hyperinflation.   Seeking Alpha has a super post explaining this in detail called 9 Reasons Why Quantitative Easing Is Bad for the U.S. Economy. Although the short form is that quantitative easing can lead to serious hyperinflation and that the cycle of debt needs to come to an end.

Personally, there would be better ways to quantitatively ease the economy other than increase debt.  It seems that they could infuse the money via a lottery.  Given how lottery winners can go through the money, that would stimulate the economy.  There must be other ways to spend the money in a way that isn’t as obvious as giving it to the banks to shore up their assets.  After all, most counterfeiters don’t want to get caught.  But, I think this is a method of creating money, which while “legitimate”, ends up causing as much havoc as the illegal methods in the end.

Advertisements
%d bloggers like this: