What is QE3?

For several decades, the American authorities have been stimulating economic development by stimulating consumer demand for loans., and as a result, it is quite normal for Americans to live in debt all their lives, buying everything – At home, auto, other technique, tour trips……. on credit. Это известно… and we are the same authorities “push through” the same way of life, recently called CONSUMPTION.

If the demand for loans falls, FED США понижает процентную ставку кредитов, they are getting cheaper, and the population starts to take them again and, thus, the growth of domestic demand again pushes the development of the economy. As a result, to 2001 году оказалось, that everyone should, ie. the whole economy lives in debt. And even debts, converted into securities (bonds, bond), used as collateral for new loans, ie. again for debt growth.

With the onset of the financial crisis, the mortgage bubble began to deflate, caused by the cheap interest rate from Mr Greenspan in 2001 year (seem). The cost of mortgage housing began to fall, mortgage demand fell, and this caused a slowdown in the economy – the growth of unemployment and the inability to pay off debts on loans and mortgages by the unemployed population. People were kicked out of mortgage houses into the street, banks – creditors themselves went bankrupt, as loan defaults have become massive.

Thus, by analogy with the domino effect, lined up, and the markets began to fall.

Debts (bonds) began to depreciate en masse, and they accumulated on the US market for a huge amount… trillions!

In this situation, the population and business fell into a state of fear., and stopped how to take loans, so give them, because. banks have greatly tightened the requirements for “качеству” borrower, and there are fewer such borrowers. Т.о. фактор, the growth of the US economy over the years, disappeared. And at the same time, the population, Seeing, that house prices are falling, began to expect their further fall, which further reduced domestic demand, caused a further rise in unemployment… Briefly speaking, vicious circle.

And then the Fed offered to buy the depreciated debts from the economy, за деньги (bucks). Where to get the money? – Let's print! This measure was supposed to restore public confidence in the future and serve to restore demand.. This is how QE1 appeared – Quantitative Easing 1 (количественное смягчение).

QE1 стартанула в ноябре 2008 of the year, and by June 2010 G. Fed bought mortgage debts, etc.. bonds on 2,1 trillion. bucks.

QE2 началось в ноябре 2010 and should end in June 2011 by the amount 600 billion. bucks.

QE3, As expected, may start in August 2011.

The danger of QE2 and QE3 is, what at bank rates, близких к 0, and with the indefatigable printing of the Fed bucks, the dollar rate is constantly falling, inflation risk increases, and business does not invest in the economy, fearing these factors, which can lead to high inflation in case of further economic decline – стагфляции. As a matter of fact, the economy under QE3 is simply flooded with cheap money, but its restructuring does not take place – ie. the patient is simply injected with stimulants, In hope, that he will start living as healthy again, without changing the old way of life, causing the disease.

In fact, the QE3 theory is more complicated., but for understanding – enough.

QE3 – this is a buyback of impaired bonds from the Fed market, due to the work of the dollar printing press.