On Nov 3, 2010, at 6:18 PM, Chuck Grimes wrote:
>
> The Fed announced today that it will buy $600 billion of longer-term
> Treasury securities by the end of the second quarter of 2011, a pace
> of about $75 billion per month.
>
> Economists call it "quantitative easing." It gets the name "QE2" -
> like the ship - because this would be the second round...
>
> Would somebody on LBO explain the above.
Read Yves Smith, or even Krugman. When the Fed buys long-term notes the money goes back to the banks, who have to lend it back to the Fed (since they already have superabundant liquidity) by buying short-term notes. All that is accomplished, net, is to shorten the average maturity of the Federal debt by a few months. Economic effect-- virtually nothing.
Shane Mage
"All things are an equal exchange for fire and fire for all things, as goods are for gold and gold for goods."
Herakleitos of Ephesos, fr, 90