Response to Various Articles on Quantitative Easing - Essay Example

I agree with the author onthatuantitative easing is not printing money instead it is meant to stimulate economic growth. This is always done to lower interest rates and increase the supply of money in an economy. Although I disagree with him when he says that reserves are not money. It is true that money is a medium of exchange and a unit of account. However, the money reserved still attracts interest and during recession periods when reserves increase they will attract huge interest.

I do not agree with the author of the article that ending quantitative easing when unemployment reduces to below 7 % will be dangerous to the economy. It is true that quantitative easing is done for the following reasons; foster employment, encourage lending, encourage borrowing, increase spending, and reduce interest rates. However, it should be noted that quantitative easing has various risks such as increased inflation, reduced international trade, it is also a threat to the value of the US dollar, and it also encourages debt by both organizations and consumers. In relation to this, I think stopping quantitative easing after unemployment has fallen below 7 % will not be bad for the economy.

I agree with the author, if the rate of inflation increases from 2% to 2.5% then it will be prudent to stop quantitative easing. In addition, the rate of real GDP has been falling from 2.2 % to 2.4 % and finally to 1.7 %. It means that quantitative easing has very little effect. Furthermore, the reason why federation banks exist is to increase on a sustainable basis real per capita income. However much quantitative easing has various benefits it does not increase economic growth.