The Fed plans to purchase a second round of U.S Treasuries next year in yet another attempt to stimulate the economy. The purchase will range from $500 billion to $2 trillion based upon what The Fed decides in the coming months. However, many top economists are contending that the amount the The Fed decides to purchase will have little difference between $500 billion --> $2 trillion and that furthermore, the purchase itself will do little if anything to begin with in the first place. Referring to the proposed purchase by The Fed, chief U.S. economist at IHS Global Insight, Nigel Gault said, “This is not a game changer for the economic outlook”.
Gault's models show that $500 billion of purchases would boost growth 0.1 percentage point in 2011 and leave the unemployment rate at 9 percent or above for the next two years. This leaves this student questioning; If it isn't going to do anything, then why do it in the first place?
This is a very interesting article when discussing the impact of the Fed's new attempt to stimulate economic growth. To begin with, any action by the Fed is probably not going to have such an immediate impact that our country desires. The economic recovery is inevitably going to be a slow process. In addition, it is tough to tell how much consumer confidence will be gained by the Fed's plan to purchase U.S. treasuries.
ReplyDelete