Federal Reserve introduction of 600 billion U.S. dollars of the debt purchase plan

Early November, the Fed announced the 600 billion U.S. dollars of the debt purchase plan that QE2 policy, the markets have multiple arguments.

QE2 has been widely criticized, bonds or even criticize the king of Gross is "Ponzi scheme." In the role of various factors, QE2 has become more large-scale, scattered the money has always been like Bernanke is not the end of the QE2 is still implied, unless the market is expected to achieve its inflation target set. So what effect QE2 really want to achieve? In general, it will Yangzhi long-term interest rates, 600 billion U.S. dollars will be long-term Treasury rates down about 20 basis points or so, but the market and the Fed as if a joke: the U.S. Treasury market has been hit a new high. This makes Bernanke dilemma.

Long-term interest rates 20 basis points down on the U.S. economy help? For now, its U.S. real estate market and the purchase of a foreclosure is not big, too small benefits it provides. However, Bernanke believed in a "leveraging theory": the Fed buying bonds significantly, forcing the market to accept low interest rates, market investors will increase the purchase of other assets (eg stock) intensity to construct a man-made the great bull market, the stock market rise will increase household wealth and consumer demand, which will stimulate economic growth. Frankly, the situation facing Bernanke is weird: because "the equities bull market" and "real estate bear market," co-exist; stock market wealth growth and the economic sector "to the debt of the" co-exist; accelerate the leveraging and deleveraging of co-exist.

This fact means that the growth of wealth in a given market is likely to be used to repay another debt market, the role of being offset. But Bernanke stressed "QE2 to counter deflation" is untenable. But in fact, if we look at changes in CPI, currently can not find the shadow of deflation. Inflation seems to rise in Europe, the U.S. core CPI is slowly rising. A little longer time to read with 2% level may be a lower limit. This means that if the U.S. economy has entered a normal track, inflation will surprise zoom into jumping inflation. QE upon their banking system, large amounts of cash, was hoarding, because lack of credit demand. Once an industry or economic sector needs to become a "leader", hoarding cash may be contagious for another type of credit, this is a bubble in the past the United States "forced copy", the risk is staggering.

QE is nothing more than the U.S. plan for negative interest rates with inflation, let the dollar fall. This is equivalent to the U.S. to become a world awash with liquidity, exports, speculators get funds from the U.S. market and into emerging market countries, emerging market countries, the first reaction is capital controls. At the same time, emerging market countries will use other means to raise interest rates to face the problem of domestic inflation and demand inflation, asset price bubbles as limited as possible to stop hot money arbitrage. In fact, these acts against the United States policy has offset. Because the emerging market countries find hot money arbitrage model are the "asset bubble benefit + the currency appreciation", if combat asset bubbles, will be shrinking domestic demand, then the United States from emerging market countries will not receive a substantial increase in export demand. Emerging market countries will not bear the international monetary system has been adjusted by the role of follower, they would not have tolerated the continuous depreciation of the dollar without taking following devaluation. In other words, the U.S. plan in addition to expanding the QE of the world monetary system disorder, the purely monetary benefit is limited, but its costs are severe abnormalities.

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