Tuesday, November 2, 2010

Quantitive Easing Part 2

The US Federal Reserves begins preparations for what has been called Quantitive Easing part 2, or QE2. The problem with economics is that economists themselves try to mystify the subject in order to remain relevant. Economics is becoming a science but not yet there, therefore to seem scientific most economists speak in a language that tries to make it sound complicated, using words like endogenous or exogenous, instead of just saying internal factors or external factors, the language just wants to look sophisticated, style over substance. Not science because most economist actually believe for example you can treat a human being like time, they do not confuse discretion and dimension of a variable, such small things...they treat a human like you can cut him up in a thousand pieces, shame

Now if quantitative easing was explained without difficult language nobody would be against it, because it can be done, the idea is simply to put money into the system so that banks have enough money and will therefore to earn income place that money in more risky lending, hopefully to people on 'main-street' so to say.

I had the chance to read and discuss a wonderful paper by a certain Warren Hrung from the Federal reserve of New York, I could understand it because I am familiar with the language but no way would somebody who is not familiar with economics understand it, simply because of the language. The paper entitled "Responses to the Financial Crisis, Treasury Debt, and the Impact on Short-Term Money Markets" opened my eyes to reality, in a world of fiat money there are things that the central money authorities can do and these things follow principles laid down in monetary economics. Enough quantitative easing should nearly always work for a while, half a trillion dollars should be a good stimulus, don't get me wrong, I am not for making people rich who do not deserve it, I find that immoral, but eventually this money should actually end up in main-street, but alas the global market, some of this money might just end up in the Thai stock exchange because maybe they offer better short term returns than investing in main-street of USA, therefore who knows the effects, we can only be sure that the money supply will increase substantially.

I believe it is a good idea, but one needs to discuss it in simple language, not complicated language.

Bhekuzulu Khumalo

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Bhekuzulu Khumalo

I write about knowledge economics, information, liberty, and freedom