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Originally Posted by Slava
Well a GDP of 2-21/2 and a recession are two different things.
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I know this, I'm only repeating what Jan Hatzuis said.
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While its not the cool position, the reality is the US has a debt of about 74% of their GDP....not great, but still manageable for an economy of their size. It has to be noted that as they contracted in 2008/09 that the ratio must have increased as well? The US economy will recover, and no one seems to make much of an argument against that fact....so they could afford to borrow more and embark on QE3 if they had no choice.
As for the effect it had the first two times, it was actually quite pronounced. Its a strange coincidence that QE2 ends and a few weeks later we find ourselves in this position. The needle was moving the right way through the first two rounds of QE, and these things just take time....so who knkws how mucb ground could be gained through a third round. Of course part.of the trick though is finding a time go cut the easing off, so its hard to say.
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It seems worrisome to me only because they obviously can't lower interest rates any further and if (when?) they decide to do another QE, doesn't this pose the risk of causing a crazy amount if inflation? On top of that, after being downgraded to AA+ one can only assume less foreign investments which seems to me like it's putting the US into a vicious loop.
This is only based on what little I know, but I'm doing my best to try and learn how this works.