Quantitative Easing During The Bush And Obama Administrations

1304 words - 5 pages

Quantitative easing is an unusual form of policy used when interest rates are near 0%. Banks rouse the nationwide financial system when usual monetary policies have become ineffective. In recent decades the government Central bank has argued they are the government’s most important financial agency.
Throughout their power to change interest rates and buy massive amounts of financial assets, the Federal Reserve System applied more influence over economic growth and the employment rate in recent times than any other government entity.
During the Obama administration it’s been used to sustain the financial system after the Wall Street meltdown in 2008; it also gave the economy extraordinarily methods of support during the recession such as purchases of securities, the creation of new lending platforms and a weak recovery that trailed. The FED’s did not mention to anybody that banks needed help with emergency loans to assure their investors that their firms weren’t in danger. These actions are credited to quantitative easing, along with the stimulus bill and federal bank bailouts, preventing a global depression. The central bank provides asset purchases, emergency loans and other forms of aid worth approximately $7.8 trillion dollars, making them the government’s largest effort to the financial system.
Quantitative easing lowers interest rates, makes it cheaper for the banks to borrow money and generally helps the banks give loans that help the activity of the economy. During the recession banks do not want to lend money so quantitative easing comes in hand by methods of bringing money into the economy and helping lower interest rates that Central banks do not usually control. Purchasing large debt by “expanding the balance sheet,” making the money available for banks in need to borrow, expanding the amount of money going around the economy and reducing long-term interest rates. Quantitative easing is in limited use when problems are a lack of need, businesses and consumers were not interested in spending during high unemployment times knowing that money is cheaper. Stock markets were advertised more, costs of American exports were lowered it also allowed companies to borrow money at lower interest rates.
Using quantitative easing has helped the recovery of the USA and other developing countries. The Fed’s then limited their ability to pursue more measures, but congress ignored those appeals to help support the economy. The Fed’s decided to use smaller steps to help investor expectations and to prevent a possible financial crisis in Europe. In 2011 it was announced that the FED’s would hold short-term interest rates close to zero percent through 2013; to help support the economy. Soon after it was announced that using the “twist” operation would push long-term interest rates down, by purchasing $400 billion in long-term treasury securities with profits from the sale of the short-term government debt. Inaugurating a policy to help shape market...

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