Aug 11, 2011

Quantitative Easing - Masturbating the Economy


Some of the guys down at the bar ask me what does QE2 means, well i told them that QE2 is not Queen Elizabeth the 2nd but means "Quantitative Easing" and the 2 means "again" the second time. And this friend of mine who is an Engineer added "wtf is that" and the economy?

You see most people have heard this term from the financial papers or over the news especially with the recent Market Crash or more appropriately, It's a damn shit Meltdown! That means more of it to come on a much more prolonged period. A crash could be just a temporary reaction to an event but a Meltdown is a over a much more longer period due to some protracted long overdue inherent critical problem in the economy that remains unresolved.

My answer in short to them down at the Bar was it means you are Screwed! The economy is F@#$! Quantitative Easing is Masturbating the Economy! Your goods are not selling enough and your workers are under worked and overpaid. QE is never the solution but a lazy temporary patch up job and you know what after a while you find that it is a lousy patch up job and its leaking again and you call in the same old repairman again and he comes in to do another patch up job and so there comes your QE2 and the next day it leaks again and you call in the same old guy which gives you another lousy patch up job and so now we have QE3!

This finance guy from the Insurance company added that the US Federal Reserve (US Central bank) has just announced that they will keep the interest rate low for the next two years and that should help the economy in terms of lower cost of funds. Well we could easily translate what the Fed is actually saying is that they are expecting the economy to be real bad for the next two years and if the value of your money as measured by the interest rate is at 0%? And at this rate of 0% interest you probably need to pay the bank for keeping your money. What does it tell you when the value of your money goes to zero percent interest?

Anyway maybe a more profound explanation about QE could be found in this video from CNBC.

Quantitative Easing


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