A persistently moribund economic system has led Ben Bernanke to suggest that the Federal Reserve will resume quantitative easing, a policy known as QE2. The mere possibility the Fed will buy much more Treasuries to pump cash into the economy has devalued the dollar, lowered treasury yields, boosted stocks and elevated the price of oil, gold, silver, corn and other commodities. Yet joblessness remains persistently high, the primary threat to economic recovery, according to Bernanke.

Bernanke feels QE2 will make deflation stop

When trying to work with joblessness problems, quantitative easing is the only method to go thinking about rates of interest are at practically zero. In a speech in Boston Friday, Bernanke said high joblessness is a scourge that could start feeding on itself by causing a debilitating cycle of deflation. Bernanke said that we have to think about inflation could be too low right now which is why limiting inflation as the Fed is doing might be a bad thing, reports CNNMoney.com. The dollar will become weaker with quantitative easing, which means we'd be putting a lot more cash into the economy. The Fed has increased the cash supply by purchasing almost $2 trillion in assets since 2008, to little effect.

The economy effected by the QE2 idea

The November 2-3 meeting is where buyers plan on listening to the QE2 announcement from the Fed. The Associated Press reports that since Bernanke started hinting that he would order such a move, anticipation of QE2 has profoundly impacted the economic system. Oil went up 10 percent in price. Now Americans are paying millions more each and every week for gas. $400 million more is being paid. Gold has risen 11 percent to $1,377.60. Corn futures are up more than 30 percent. The average interest rate on a 30-year fixed mortgage has fallen to 4.19 percent, the lowest since the 1950s. Then there was the change in the average rate of interest paid on a one-year certificate of deposit. There was a .55 percent fall. The joblessness rate remained stuck near double digits.

Factors QE2 won't last

Bernanke talked about QE2 while in Boston. He said the QE2 would help the economic system greatly. Of course, an increase in jobs and decrease in unemployment along with increased spending and a better corporate revenue are what you'd anticipate from a weak dollar and low rate of interest. CNN Money heard from Kevin Giddis of Morgan Keegan that since it hasn't worked yet, much more quantitative easing certainly won't help. "I don't think getting securities is going to pull the economic system out of a ditch," is what he said. "The sector isn't getting it. We've made cash available freely for a when now. The Fed has to start thinking way outside the box. This is not a war where conventional weapons could be used."

Citations

CNN Money

money.cnn.com/2010/10/15/news/economy/bernanke_speech/?npt=NP1

Associated Press

google.com/hostednews/ap/article/ALeqM5hJprdjYORlZxJiFlMznIOBO7fs4A?docId=afebcea0bbfd4992bc5c4f9b46886f7c