11/17/10

Funny Money



What is quantitative easing? In short, it's kind of like printing money. The Federal Reserve buys government bonds and some financial securities from big New York City banks and pays for them with "electronic money", simply changing the bank records on the Fed's computer records. In some cases, they print tangible bills for the banks. In theory quantitative easing (QE2) should lower interest rates, which will increase investment spending, which will increase employment and that will help the economy. In reality, creating money that doesn't exist, creates bubbles by distorting markets and lowers the value of the dollar. Add a weak dollar to low interest rates and you get a bad time for savers and safe investing. So people move to risky investments. Toss in that bubble and we get some really rich people and some really unfortunate people… the very kind of thing Leftists claim to take 8 years to produce and need 8 years to fix. Funny money can't grow an economy. Government can create a predictable and stable tax structure through promising lower taxes and balanced budgets, encourage hiring through tax adjustments and encourage innovation through simplifying regulations encouraging open and fair competition.

The other thing to do is wait. What goes down, comes up, faster than climbing out of recessions.

No comments:

Post a Comment