13 November 2014
While the policy of easy money known as quantitive easing (QE) has saved the US financial sector from collapse, it has also been criticised for causing various problems. One recent criticism: QE could worsen the already worrisome global trend of increasing income inequality.
The US Federal Reserve has actually terminated the quantitative easing or QE. It is basically a programme for repeated purchase of assets – mortgage-backed securities and bonds – for an unspecified period by the Fed. QE was launched as part of efforts to fight against the credit crunch that became contagious since the bankruptcy of Lehman Brothers in 2008.
The programme was implemented in three stages. The last one (QE3) launched in September 2012 involved a monthly purchase of securities of US$40 billion (later raised to US$85 billion). When some economic indicators showed improvement the Fed decided to end the programme. This was done through the tapering-off or reduction of the monthly purchase by US$15 billion first announced in May 2013. It proved to be quite a controversial move.
…J. Soedradjad Djiwandono is Professor of International Political Economy, S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University and Emeritus Professor of Economics, University of Indonesia.
RSIS / Online
Last updated on 14/11/2014