Easy

A big whoop went up when the announcement was made: “Quantitative Easing to continue!”

I called a finance expert.

“What is Quantitative Easing?” I asked.

“A form of Communism,” she said. “It’s Socialism, at the very least.”

She told me Quantitative Easing is a Federal Reserve tactic to manipulate private financial markets; the Fed is printing money it doesn’t have and playing loose with the cash, giving people the false impression of a strong economy so they’ll borrow more money and buy more stuff.

“And furthermore,” she said, “Federal Reserve Chairman, Ben Bernanke is like the Wizard of Oz. He hides behind his smokescreen curtain and bellows grand proclamations that send people scattering in fear.”

For example, she told me, Bernanke recently hinted that it may be time to “taper down” Quantitative Easing. That hint was perceived as a proclamation fearful enough to send people scattering from the stock market like the Cowardly Lion, and to send interest rates skyward.

“So how does Quantitative Easing work?” I asked.

The Fed buys up bonds and securities, she told me, to keep them at an inflated value, which lowers interest rates. She said the Fed has been spending $85 billion a month on buying these bonds and securities.

She said when the Fed pulls out of the bonds and securities market, people will be left holding the bag, interest rates will soar, people will lose jobs, and we’ll suffer runaway inflation.

“The Fed calls it ‘stimulus,’ she said. “I call it ridiculous!”

I called another finance expert.

“Look,” he said, “Quantitative Easing has built our economy back up from the devastation of the financial collapse of 2008. The point of the program is to lower long-term interest rates, so people can afford housing loans. Housing is the engine that drives the creation of jobs and economic vitality.”

He said Quantitative Easing has stabilized our economy because people believe in the Federal Reserve’s management of interest rates.

“Quantitative Easing is responsible for a better housing market, more jobs, and a rising stock market,” he said, “and I’m glad the Fed decided to continue it. Ben Bernanke should get a lot of credit for keeping a steady hand.”

I told him Bernanke had been compared to the Wizard of Oz.

“More like Clark Kent,” he said, “with an “S” on his undershirt.”

“S” is for ‘Stimulus’ no doubt.