Friday, September 14, 2012

QE-3: A 21st Century “New Deal”?

Recently given the green light by FED Chairman Ben Bernanke, will QE-3 – or Quantitative Easing part 3 finally trigger a healthy American economic recovery?

By: Ringo Bones

With a slated budget of 40 billion US dollars a month, the latest QE-3 or Quantitative Easing part 3 recently given the green light by US Federal Reserve Chairman Ben Bernanke is now seen as the 21st Century equivalent of the Great Depression era New Deal that could finally trigger a healthy American economic recovery and create much needed jobs. Unfortunately, the US Republican Party, who are still obsessed with their obstructionist policies who collectively voted to kill-off President Obama’s latest job stimulus bill, sees such “unconventional” or Keynesian style economic bailout as nothing more than a mere “ploy” to get President Obama reelected. But is there really a “dark side” to large-scale “money from nothing” quantitative easing?

Even though the previous two quantitative easing programs are not as ambitious as the new one, one of the Obama administration’s success stories is now the renewed economic health of the insurance firm AIG – which a few years ago was seen as an “economic black hole” insatiably devouring stimulus money. Proof that Keynesian Economics still works – as opposed to fiscal austerity? The 40 billion US dollar a month QE-3 is primarily aimed at purchasing “bad mortgages” that triggered America’s economic crisis in the first place during the tenure of George W. Bush. Unfortunately, prolonged quantitative easing for the purpose of economic stimulus could further trigger inflationary pressures and could further devalue the US dollar and it is still uncertain whether the latest round of this “money from nothing” quantitative easing could finally lower the unemployment rate in the United States from the 8% mark.   

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