Macroecons Great Summary Essay

558 words - 3 pages

Slide 1:
To answer this question, we have to first understand that Quantitative Easing in US is a long dragged out process. Beginning with QE 1 initiated in November 2008 and in fact up till today, QE 4 is still taking place, also called QE infinity, it will take place until unemployment rate falls below 6.5% or until core inflation rose above 2.5%. Hence, when evaluating the success of something that lasts so many years, what constitutes a success? Are we referring to whether QE can prevent an economy from falling into a deep recession? Or do we define success by bringing an economy in a recession state back to full employment?
Slide 2:
Let me now bring you back to the year 2008 when QE was first introduced. The economy was in a constant downhill ...view middle of the document...


Slide 3:
The Fed commenced QE2 and started buying another $600 billion of treasury. Once again, the market responded positively as seen from the increase in US share prices.
Slide 4:
This cycle repeats itself multiple times till today. We are in the midst of QE4 where the Fed continued buying financial assets at $85billion a month. So by using the stock market as a representation of the economy, we see that the economy is performing much better now than it was at the start of the great recession. However of course, we all know that these markets have been artificially inflated by federal government involvement. When Quantitative easing finally stops, one day it will, we can expect the stock market to fall. However, what we can be sure about is that QE helped to stop what looked to be a great recession.
Slide 5:
So having compared stock prices, let me now bring in other macroeconomic indicators to show a more complete picture. In terms of US real GDP, it has grown. However, unemployment rate is still unsatisfactory. This is the reason why QE is still in place today. With the intention to let unemployment fall below 6.5%. Hence in terms of getting employment rate to a healthy level, it has failed.
Slide 6:
At the end of the day, whether QE is successful or not really depends on how we define success.
Slide 7:
We would never know what the US economy will be like without QE. The US economy took a “wait and see” attitude and that gave us the great depression in the 1930s. Today, we see that QE helped to re-instate consumer and investor confidence and a recession is averted. So if we define success as averting recession, which was the primary reason why QE was rolled out in the first place, then it is..
Slide 8:
SUCCESSFUL!
Slide 9:
Thank you!

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