Quantitative Easing
From the Fed:
Q: Will these operations be reserve neutral?
A: No, these operations will be financed through the creation of additional bank reserves.
in FAQs: Purchasing Direct Obligations of Housing-Related GSEs
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December 3rd, 2008 at 5:45 pm
At some point M3 should explode into the real economy. But then the Fed can just undue what its done just as easily. But then maybe no one will want to borrow from banks for ages and ages and ages no matter what the interest rate is.
Coming from New Zealand, where in the teeth of a severe recession, in 1991, interest rates came down to about 5.5%, zero interest is hard to comprehend.
December 4th, 2008 at 5:48 pm
Update, New Zealand is now at 5.5% again. The reserve bank governor thinks the recession is over. I’m of the opinion that this is an excellent contrarian indicator.
December 5th, 2008 at 10:41 pm
It’s about time, either that or long past.