Boston, MA 03/04/2013 (wallstreetpr) – Quantitative Easing, by which the US Reserve Bank buys the nation’s debt to lower the interest rates is said to be dubbed by the Federal Reserve. The Reserve’s Board meeting this week is said to take a final decision on this. The biggest triggers of such a decision is a (merely) partial success of QE’s implementation. Quite evidently the economic measure did help in decreasing in the interest rates which decline boosted increase in corporate borrowings from the banks, exactly as expected. However, the money borrowed which was actually supposed (and expected) to be invested in new ventures (with a resultant uplift of the job market), was used for currency hoarding. Instead of investing cooperators preferred to hold on to their borrowed funds to finance their existing debtors and hoard currency. The ultimate development was exactly the opposite of what was expected.
However, Quantitative Easing has helped to economy to grow, whereby the investors were encouraged to invest in stock instead of the less risky (and obviously more attractive) bond markets. The S&P 500 has seen a significant growth and was up 13% during the year, which is much better than the actual (organic) growth. However, indirectly it has made people more risk averse which is not so much of a good sign for the economy. This has generated only a marginal rise in the employment producing 146,000 jobs in the last three years after the recession ended.
Looking at the larger picture one may spot another end to this argument; aside that uncovers a whole new reason for the shortfall in corporate investment in new ventures. It is not an urge to hoard money instead the investors are wary of a consistently weakening economy and would want to save money for the future.
The new decision brings up hope for an improvement in the economy from where it stands now.