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The Fed is trying to stimulate the economy. The ideas is people and companies should spend money, invest, give loans, etc. The Fed can't force you to spend, but
by fghh45sdfhr3 14y ago
The Fed is trying to stimulate the economy. The ideas is people and companies should spend money, invest, give loans, etc. The Fed can't force you to spend, but they can raise the inflation rate. Ideally this means you decide to shift from saving to spending and investing and the economy recovers.
The downside is that this hurts savers, particularly small time savers who aren't investor class people. And is still not guaranteed to work. So you get the worst of both worlds, a higher inflation rate and still not enough jobs.
- pessimizer 14y agoI find it interesting how you judge the inflation rate on a continuum (higher than before, when it was lower), but the jobless rate as a binary (enough/not enough). For example, I could say that it was the best of both worlds: more jobs, and the inflation rate won't be bad. I just looked back at the first sentences of that paragraph, and they're just as interesting. Both parts of the observation are binary (hurt/unhurt vs. guaranteed/not guaranteed), but the one that you want to imply is more important, you judge on a positive margin, and the one you want to imply is less important, you judge on a negative margin, i.e. if a "small time saver" loses a single dollar more under Q.E.3 than if it hadn't happened, that "small time saver" was clearly hurt; if there is any confluence of future possibilities that could cause Q.E.3 to not achieve the Fed's goals, it is clearly not guaranteed. People are so interesting in so few words.
- fghh45sdfhr3 14y agoGreat analysis, I am indeed biased. But too lazy to describe my bias in details, so I just write with bias.