Quantitative easing monetary policy to purchase the financial assets, monetary expansion may not be expressed as price increases, nor does it reflect the exchange rate depreciation, but the performance of asset prices, to attract capital to enter, but currency appreciation or stability.
Since March 19, 2009 United States adopted the quantitative easing monetary policy, the international community that the U.S. printing money, will lead to a severe global inflation and severe depreciation of the dollar, but more than a year passed, and no such situation. Today, the United States once again to quantify the implementation of the policy will not lead to serious inflation.
To understand the United States once again the impact of quantitative easing monetary policy must be clear depth of the crisis and help the United States virtual economy quantitative easing monetary policy and rescue the real economy of the loose monetary policy differences.
First, the quantitative easing to buy long term financial assets.
From September 2008 Lehman Brothers bankruptcy, the United States gradually implemented quantitative easing policy, the main elements: First, the federal benchmark interest rate from 5.25 before the crisis reduced to near zero, and constant comparison time; Second, Federal Reserve Bank of innovative financial instruments, provide liquidity to the market. Such as through the tender deposit to the financial health of banks to provide loans TAF, acquired from a dealer two rooms and issued by the Federal Home Loan Bank discount notes, commercial paper from eligible issuers hands of the direct purchase of unsecured and asset backed commercial paper, money market investors to provide financing to facilitate the International Monetary Fund (investment facilitation), the establishment of asset backed securities lending instruments, to facilitate the home and small businesses need credit. These innovative instruments of monetary policy aims to provide liquidity to the market directly. Third, the Federal Reserve Bank of bulk purchase of long term securities, such as the purchase of agency bonds and mortgage backed securities, purchase of government bonds.
Quantitative easing monetary policy in the United States from March 2009 before the change in focus on resolving the lack of liquidity for the purchase of financial assets. March 5, 2009, the Fed bought MBS (mortgage backed bonds) is only 68.9 billion U.S. dollars of assets, to November 4, 2010 was 1.051 trillion yuan U.S. dollars, over the same period, the purchase of government bonds increased from $ 474,700,000,000 $ 842,000,000,000, Federal agency debt securities assets increased from $ 38,200,000,000 $ 149,700,000,000, an increase of long term financial assets total to $ 1,460,900,000,000.
The European Central Bank so far only been implemented for 600 million euros bond purchase plan, and a specific time period July 2009 to June 2010. Japan imposed only a small amount of quantitative easing monetary policy, including the recent purchase of 5 trillion yen bond plan, and only 600 million.
Second, the money to buy financial assets not lead to a serious devaluation of the exchange rate and prices have risen.
Quantitative easing monetary policy to purchase the financial assets do not constitute a direct demand for resources, it does not directly affect the purchasing power and price, only the impact expected. Therefore, in theory that the expansion of the monetary base will lead to rising prices and exchange rate depreciation is applied to the theory of the real economy, while the virtual economy is different.
After the virtual economy, monetary expansion may not be expressed as price increases, not the performance of the product costs and the decline in export earnings, it is not reflected in the exchange rate depreciation, but the performance of asset prices (such as real estate, stocks and a variety of derivative financial price), to attract capital to enter, but currency appreciation or stability.
The crisis phase of monetary policy to buy financial assets, the aim of maintaining stability in asset prices, and even stimulate the demand for financial assets, thus attract capital, will not lead to price increases, exports will not increase the cost, but reduced the cost of raising funds, so money is not depreciation pressure. However, if the asset price volatility, it will lead to currency depreciation, such as mid September 2008 the U.S. dollar is the case.
Quantitative easing monetary policy is mainly used to purchase long term financial assets, aimed at stabilizing financial markets, long term securities asset prices, to prevent their decline. Therefore, the quantitative easing policy is to maintain the U.S. position and U.S. dollar consolidated financial stability essential to act helpless.
Third, the U.S. financial crisis ridden, quantitative easing monetary policy has not been in place, will continue for at least 1 year.
To liquidity, the U.S. has withdrawn from the quantitative easing monetary policy. But the stability of the financial asset prices, the United States not only failed to withdraw from the Federal Reserve Bank of quantitative easing, the quantitative scale are also being increased to increase the purchase of assets. And to MBS, its loss in value than the current amount should have been a huge purchase, the author of the estimated more than 30,000 billion dollars in damage, is currently purchased only 1 / 3 less, but the federal government deficit bonds need Federal Reserve Bank support.
Second, the current U.S. market, although the underlying address liquidity problems, but the banks do not trust. October 25 this year, the United States reached 139 insolvent banks, close to last year s 140, the inter bank lending market funds is not active, do not know which bank suddenly declared bankruptcy. More importantly, although in April 2009 to adjust the accounting standards to financial institutions the value of financial assets purchased by the loss can be calculated in accordance with section next time, increase the profits of financial institutions, reducing the pressure loss of assets, but also makes trust between financial institutions disappeared. European and other developed countries have not taken these measures. This issue will have long plagued U.S. financial institutions.
Again, the U.S. Government has set up institutions to deal with toxic assets, but only disposed of some of the toxic assets, there are still very much raw. And financial institutions, high wage problem is not resolved, this does not help to reduce the cost of financial institutions.
Finally, the U.S. Federal Reserve Bank of quantitative easing monetary policy to support the Government s fiscal deficit will be a long term behavior, the United States can be expected in financial surplus within two years is difficult.
Overall, the quantitative easing policy to purchase financial assets, mainly on the real economy and prices of products do not have a direct impact, there is no increase in money supply due to a result of inflation. At least in the U.S. domestic financial institutions can not afford to buy within the next year, so will the Federal Reserve Bank of relatively long period of time the bonds held by financial institutions, quantitative easing monetary policy is difficult to exit.
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