an adoration of all things rad
This is a big deal: The Federal Reserve announced this afternoon that it would pursue a third round of quantitative easing, known as QE3. And unlike previous rounds, this one has no predetermined end date.
The central bank said that it will continue adding to its balance sheet by about $40 billion each month — essentially creating additional currency and adding it to the money supply — indefinitely. The Federal Reserve also made clear that it will extend its current “exceptionally low” interest rate on federal funds through at least the middle of 2015.
*How is this not the biggest news story?!? The Fed announces that it will just print $40 billion a month until the economy is fixed. How the fuck does that make any sense? The economy is shit, average people are broke, and the Dow is soaring. The whole financial system is corrupt. This isn’t just dumb, it is evil.
Quantitative easing is frequently described as “unconventional monetary policy,” but the open-ended nature of this bond-buying commitment is unique even by the standards of previous actions. It brings the Federal Reserve closer to a policy idea that’s become known as NGDP (Nominal Growth Domestic Product) targeting, in which the Fed basically says it will continue buying bonds until the economy reaches a certain target level of inflation and growth. This new round of QE isn’t pegged to any sort of economic target, but it does commit the Fed to printing money until, well…whenever it feels like stopping. But taking this idea on its own terms, the Fed’s announcement might undermine the way NGDP targeting is supposed to work. The idea is that the Fed provides both confidence and clarity: It will print money until certain well-established targets are met, and boost demand and economic activity as a result. But without a defined target, the uncertainty still exists.