Wednesday, November 10, 2010
The day after the midterm elections, the Federal Reserve announced that it would begin a second round of quantitative easing: "the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month." Quantitative easing is a term that was recently created to replace the more familiar term printing money. Because the historical record of printing money is so grim, that term developed a negative connotation. Of course, printing money was coined specifically to replace the older jargon debasing the currency for largely the same reason. All three mean the same thing: the government is going to create money to pay its obligations and, in so doing, your money is going to become less valuable.
China doesn't like this. Germany doesn't like it which is important because they're the ones responsible for making the term printing money so unfashionable. Brazil, Thailand, and South Korea are also opposed.
In a different context, President Obama has said: "at a certain point, you've made enough money." In the context of this second round of quantitative easing, I want to know have we reached that point?