"Daily News" reporter began in late 2008 and ended in March 2010 in the first round of quantitative easing (QE1) policy context briefly in order, help to understand the effects of the Fed QE2.
QE1 is Paulson "mouth of the explosives"
U.S. local time November 23, 2008, the U.S. government decided to inject 20 billion U.S. dollars of Citibank, and its 300 billion U.S. dollars of bad assets to provide security to save this crumbling of the U.S. large commercial banks.
The next day, when the then U.S. President George W. Bush asked Treasury Secretary Henry Paulson: "How much you need to overcome this crisis sticks of explosives." "I do not know," Paulson replied, "But look at the current development situation, I may have a force in his mouth, and then lit the fuse." Paulson after retiring in his memoir, "cliff edge" ("OntheBrink") described in a dilemma when the U.S. financial crisis.
In order to save the financial system on Wall Street as the representative of the risk, had in October 2008, the U.S. Treasury $ 700,000,000,000 Tuichu Troubled Asset Relief Program (TARP, TroubledAssetReliefProgram). Before the president took office, the Bush administration has been based on the content of TARP spent nearly 3,000 million, including banking, automobile manufacturers and American International Group's investment.
And like the Paulson-led Treasury, the Fed may choose as much space. Since September 2007, the U.S. federal funds rate from 5.25% all the way down; December 16, 2008, the Federal Reserve once again cut the federal funds rate 0.75 percentage point cut to 0.25% range to 0. The historically low interest rate range has been maintained to the present.
U.S. local time November 24, 2008, the Fed announced it will purchase from the Freddie Mac, Fannie Mae and Federal Home Loan Bank issued bonds worth 1,000 billion and 5,000 billion U.S. dollars in secured asset-backed securities. This is the first time since the financial crisis, the Federal Reserve to use monetary policy of quantitative easing, the QE1. The Fed hopes to take this policy to prevent the U.S. financial system, camel free fall slide.
"Helicopter Bernanke" into QE1 dilemma
Fed aims to launch QE1 through the purchase of the beginning of the "two rooms" and the related mortgage loan assets of banks to rescue U.S. financial institutions and financial system, long-term goal is to raise employment levels and help the economy out of deflation shadow. Annual U.S. inflation rate in 2008 was 0.1%, a record low of half a century; and December 2008 the unemployment rate reached 7.2%, reaching a 16-year high. Ben Bernanke before the charge Meilian Chu had joked, they might be famous economist Milton Friedman (MiltonFriedman) "to throw cash from a helicopter" approach to fight deflation and stimulate economic growth, the resultant "helicopter Bonan g "in the title.
Bernanke valued asset prices in monetary policy conduction. Guotai Junan analyst Lv Chunjie that the quantitative easing policy of the United States play a major way, by lowering interest rates for long-term investment needs, in order to stimulate the economy out of trouble.
As of March 2010 the end of the first round of quantitative easing, the Fed bought 1.25 trillion U.S. dollars of mortgage-backed securities 3,000 billion of U.S. Treasuries and 1750 billion in agency securities, accumulated about $ 1,725,000,000,000. This makes the Nasdaq Industrial Index from the end of December 2008 of 8675 rose to the end of February 2010 to around 10,400, or more than 19%. While commodity and stock markets are rising, but financial institutions are still in the process of deleveraging, but there is still great uncertainty in economic trends, and the resulting credit crunch psychological stranded in the financial liquidity within the system can not into the real economy of credit, making it difficult to promote investment, increase the employment rate does not arise.
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