US Era of Quantitative Easing Soon to Be Over

In an article for the website Property Update, Michael Yardney talks about the proposed end of US’s increased reliance on Quantitative Easing (QE). The decision is backed by US’s assertion that its economy is now on a more surefooted territory and it may not require pumping in money through unconventional financial programs.

Quantitative Easing helping economy combat GFC blues

Since the debacle of the GFC, the Federal government has administered potent “QE” drips to a trembling economy by pushing in printed money. This, the government has achieved by purchasing mortgage backed securities and government bonds.

Impact of QE’s exit

The USA is up on its feet and QE may soon become a thing of past. So, what can the investment market expect from the end of this era, asks Yardney? QE brought a climate of reduced borrowing rates, risk-prone investments, and spending hike. Yardney asserts that while the US is not on a very sure footing yet, key sectors have definitely got a spring in their strides. Construction market, employment levels, business investments and bank lendings have all hiked. Consumer sentiment is running high and order for durable goods has a nice story going for it.

You can read the original article here.

Implications of the end of QE era

Because QE was a short term measure and a relatively new thing, the implications of its exit cannot be construed yet. Think this way: till 2000, people did not know what the long-term repercussions of LASIK surgery could be, because there was no known ‘long-term’. It was a new science.

QE is like a tightrope

Further, introducing Quantitative Easing is like walking on the tightrope. You need to get the balance just right. As has been witnessed in the past globally, QE’s effort to check deflation has resulted in stronger inflation than required. Unconventional financial policies aimed at ballooning the monetary base is a novel approach but the government has to constantly be on its toes to prevent an overspill.