"These blogposts are a reflection of my personal journey to understanding how developing this financial education can improve the lives of my family and those whom I work with".
Raymond E. Lee
Raymond E. Lee
FED CUTS INTEREST RATES TO ZERO AND ISSUING A $700B QUANTITATIVE EASING!
..On a SUNDAY!
Why should you be worried?!
So, what is quantitive easing for dummies?
Your money, the paper bills in your pocket (which are as we speak, possibly covered with CORVID-19), is given a market value by 'the market', markets increase in value however the bills do not so more bills are required to purchase within the marketplace, good so far?
So to maintain the illusion and to maintain the ability to purchase these goods which are increasing in value, the FED (Federal Reserve Bank - a private, self regulated company which sells its services for the federal system, i.e printing of money), prints more money as requested by the government.
This is called 'Fiscal Easing'.
According to Financialpedia - Quantitative easing (QE) is a form of unconventional monetary policy in which a central bank purchases longer-term government securities or other types of securities from the open market in order to increase the money supply and encourage lending and investment.
WHY YOU SHOULD CARE?!
Sure you got a job, probably at the moment though you cannot get there because of the global Corona Virus Pandemic right? So the money you have has to last you right?
If the country is not producing or selling as much there is a shortage and people hoard cash, when there is a shortage the value of items increases i.e your spending power or value of your money becomes less. What the government is generously doing is asking the FED to print $700 BILLION dollars worth of money so that everyone feels safe... and so there is enough money for you to purchase more toilet paper (don't actually do this!).
For those who have read past articles here, you know what happened in Argentina in 2001, 40 Billion usd left the country as VIP bank clients pulled their money and moved it off-shore. This left the banks empty of overnight reserves and when the run on the banks began it became messy very quickly (more than 30 people were shot dead by police in the ensuing riots).
I HIGHLY RECOMMEND reading this article from Forbes about the QE2/3/4/5 WHY? BECAUSE THE MEDIA ARE NOT TALKING ABOUT IT!!!
Five days ago the FED published this announcement.
“As announced on March 15, 2020, the Board reduced reserve requirement ratios to zero percent effective March 26, 2020. This action eliminated reserve requirements for all depository institutions.”
So people hoard devaluing cash which ends up looking like the streets in Venezuela... worst case, but could the same scenario happen in the next weeks in the usd?
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