Economic Effects of the Easy Money Concept - Essay Example

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This essay briefly provides an opinion on the economic effect of easy money policy, that the Federal Reserve started putting into practice in 2009, as a response to financial crisis. Also known as a quantitative easing policy, it proved to be effective, and its effects are considered in the essay…
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Economic Effects of the Easy Money Concept
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"Economic Effects of the Easy Money Concept"

economy for the past 20 quarters. Notably, “Europe, which did less fiscal and less monetary stimulus, is mired in its second recession in a decade; its economy has been contracting for six quarters”( “Wall Street Journal” Web). This implies that availability of a lot of cash can easily result in rapid increase in the pricing of certain items and assets, which, in my own opinion can sometimes not be fair to consumers or buyers of these assets. Fed’s action to reduce mortgage rates has assisted in home prices and construction. Moreover, there is a relief that the increasing stock and bond prices enables companies to settle “old debt and fattening rich Americans' brokerage accounts” (“Wall Street Journal” Web) as well as facilitating expansion of many companies. Indeed, this facilitated the growth and expansion of these companies. On the other hand, reduction in lending rate only worsen the situation as individuals and enterprises will borrow too much causing trouble to banks, more so, the investors will be discouraged by low yields on bank deposits, this shows that an increases or decrease in lending rate affects certain individual, be it banks, investors, borrowers or even companies. Therefore, I think the central bank should be very keen on any measure they take in order to equalize the situation. Some individuals have argued that the Fed bond buying has increased as compared to the first bond. The rapid growth of companies depends on the reduced rates to borrow excess money, and purchase mortgages as well as settle their huge dividends. In addition, the investors purchase huge bonds at very low rates, as small investors do borrow to purchase and increases their stock. These raised concerns...
This essay presents a comprehensive analysis of the effects of quantitative easing policy by the Federal Reserve, which are expounded in the article “Easy Money: Too Much of a Good Thing”, printed in the Wall Street Journal. The WSJ , is the starting point of America’s business. The journal releases the most recent updates in the political and business arena. Most importantly, it relates the recent news events both domestically and internationally to business and market alterations.
Currently as we speak, the article reveals that the Dow Jones Industrial Average has increased by 14% since September when the Federal Reserve established a third round of bond buying in September. Additionally, when the president of the European Central Bank swore in July to do all that is possible to protect euro, The Stoxx Europe 600 indexes has increased to 22%. Similarly, Japan's Nikkei has increased to 22% . This is a positive effect that central bank gained by printing lots of money and making them available in the market, to all investors, borrowers , and other interested parties.
Some individuals have argued that the Fed bond buying has increased as compared to the first bond. The rapid growth of companies depends on the reduced rates to borrow excess money, and purchase mortgages as well as settle their huge dividends. In addition, the investors purchase huge bonds at very low rates, as small investors do borrow to purchase and increases their stock.
High interest rates will probably discourage people from borrowing too much money Read More
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