Now that we have explained what quantitative easing is, we have to ask the obvious question…. Why do we have quantitative easing? We have quantitative easing because, according to the Fed (Federal Reserve) we have deflation and, also according to the Fed , deflation is bad for the economy.
Deflation means that the prices that we pay for things goes down.
During a recession, for the average person, deflation is good especially when we have had no increase in our standard of living for the last number of years. This makes it easier for us to be able to live. HOWEVER, according to the Fed this is BAD for the economy. The Fed feels that a healthy economy should experience a rate of INFLATION of around 2% per year.
How does this make any sense?
How can something that’s good for the people be bad for the economy?
The answer is it can’t. The Fed is wrong about this and it has been wrong about every major economic event in the past 20 years.
The question that you need to ask yourself is if this is so obviously wrong, what is the Feds motivation for saying that it is good???