Federal Reserve announces QE3 to aid US recovery – Telegraph.
The Federal Reserve has announced it will begin another round of quantitative easing. The central bank has said it will buy up $40bn of mortgage backed bonds a month to try and stimulate the housing market.
Economists believe QE3 could see the Fed buying up $1.5 trillion in total. This latest bid to stimulate the economy is being called “Operation Twist”. The Fed have also pledged to keep interest rates at the current record low until 2015.
However, critics argue that QE 1 and 2 were largely ineffective; that you cannot keep printing money indefinitely; and that it may do more harm than good. Some Republicans are saying the move is political, and Romney has said that he would replace Ben Bernanke as chairman of the Federal Reserve if elected.
The Dow is up more than 200 points Thursday after this news. This is the general pattern of a market rally anytime any sort of stimulus is released.
But printing money to help pay the bills is simply going to increase the supply of US dollars in the market and devalue it further.