Quote:
Originally Posted by Yasa
I know this, I'm only repeating what Jan Hatzuis said.
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.
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Well theoretically it could cause more inflation, but when your economy is deflating that would be somewhat welcome. From goldbugs over the past few years one of their prime arguments was that the government couldn't get the money out of the system and by printing so much money it would cause inflation to skyrocket. That hasn't happened at all, and while a third round might be different its hard to say.
Another thing to consider is how the QE takes place. This a relatively broad category that would include programs like TARP as well as things like bond purchase programs. As a result the impacts (both intended and unintended) will vary somewhat.