Quantitative Easing for Kids

At a presentation of Morgan Stanley, we were informed about a very educational movie. Enjoy!

Monetary Policy: Inflation

Today's Financial Times features an important article about inflation in the US. Investors are expecting inflation to be higher in the longterm. The graph on the leftern side is exhibiting the implied inflation rates of bonds maturing in 10 years.

On the rightern side you see the increasing yield of 30 year bonds. Apparently investors believe that the Fed will have problems to control inflation caused by the renewal of the quantitative easing program (so called QE2).

Monetary Policy

The most sound analysis I have heard this week was a short interview with Stephen Roach on CNBC
(http://www.businessinsider.com/stephen-roach-quantitative-easing-2010-10).

He basically said

1. Global  imbalances: To hold China accountable for the imbalances (due to their yuan-dollar peg) is nonsense,  because USA is consuming too much and hence buying too much from China and 89 other countries with which the USA has a trade deficit. So people ought to save more in the US and spend more in the other 90 countries (inluding China).
2. QE (Quantitative Easing: Fed buying securities) is only creating hot money searching for hot investments. It is not going to help the economy, because indebted American families save for their retirement, which is the right thing to do.

In a nutshell, the talk about devaluation is chatter of politicians in reelection and QE is creating only hot money in search for hot investements!