http://business.time.com/2012/09/14/ben-bernankes-heavy-artillery-will-open-ended-bond-buying-drive-down-unemployment/
Due 24 September 2012. What are the three parts of QE3? How does this plan differ from QE1 and QE2? Do you believe this plan will help the economy? What alternatives would you offer if you were in a leadership position?
Friday, September 14, 2012
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With QE3, the Fed plans to purchase mortgage-backed securities at a rate of $40 billion per month. They predict this will increase asset prices, and also help more people qualify for loans. The most important difference with this plan, is that it will have an effect of higher future asset prices, which will encourage people to make their important purchases now, before the prices rise. This will ultimately jump-start the economy, and decrease unemployment. I believe this plan will increase spending and help the economy, but I am afraid that they are not prepared for the amount of inflation that will result from this.
ReplyDeleteThe Fed plans on achieving three goals with the release of QE3. The first part is to purchase 40 billion dollars a month of open-ended mortgage-backed-security. The second part stems from the first part. Bernanke hopes that purchasing these open-ended mortgages will have the effect of lowering interest rates, helping more people qualify for mortgages or refinance. The third part of QE3 is that after the interest’s rates are lowered, it should free up more individual capital as to increase spending within the economy. The main difference between QE3 and the past ones is that QE3, in theory, will have the effect of creating an expectation of generally higher asset prices later on down the road. With people believing that prices will increase in the future, Bernanke believe it will incentivize people to go out and spend money now. This increase in spending should stimulate our economy out of its slump, while at the same time lower unemployment. The down side of this new plan is that there is a high probability that this will dramatically increase inflation in the years to come, which could prove to be a catastrophic mistake on part of Bernanke half. However, I do believe that if we are to get our economy back in shape, the first thing we need to answer is the huge unemployment problem that we are facing, so I do believe this plan has some credible merit when it comes to being able to fix our economy.
ReplyDeleteThe three aspects of QE3 that the Fed plans on instating in order to advance economic recovery are the injection of 40 billion dollars worth of a "mortgage-backed-security purchasing program" for an indefinite amount of time until economic growth and recovery begins, the purchase of financial assets with the goal of helping individuals to obtain mortgages, and the hope that, when interest rates are lowered, people will begin to participate in the market and spend. QE3 differs from QE1 and QE2 in that this program is more open-ended than the previous two. This open-ended design will create an expectation in the market of financial stability and prosperity, and thus the general public will be motivated to go out and participate in the market, thus steering us to stability. I have confidence in the ability of this plan to deliver, however I expect that the inflation our dollar will incur is going to be higher than projected. If I were in a position with a say in this, then I would suggest we shift our focus and spending towards the basic foundations of the economy - the workforce. Prioritizing things like education and training for jobs that are in demand, as well as making sure that we have properly trained employees in all of our current fields will be imperative towards shaping the economy once our unemployment rate falls under 8%, which it will. Further, introducing money towards job creation will help reduce the current unemployment rate, helping us to ultimately resurface as a dominant economic power.
ReplyDeleteIn QE3 the Fed are planning to purchase mortgage-backed securities worth 40 billion dollars a month. In an effort to reduce interest rates and stimulate the housing market. What makes this plan different from the others is they are open-ended purchases. Open ended-purchases will lower interest rates and help more people qualify for mortgages or for refinancing. I believe this plan will benefit our economy. However, we need to fix our problem of unemployment.
ReplyDeleteQE3 is comprised of three components aimed at reenergizing the economy and lowering unemployment. They include purchasing mortgage-backed securities at a rate of $40 billion per month for indefinite time period, having those purchased mortgages lower interest rates, and then, due to the lower interest rates, have individuals participate in the economy with their increased capital. So, by helping people obtain mortgages, they will have more freedom to spend in the economy. The QE3 plan contrasts with previous plans because it plans to create expectations for generally higher asset prices in the future. This will motivate people to spend their money now because they would think prices down the road will increase. As a result, businesses and individuals alike would be persuaded to hire more workers and “jump-start the economy out of its chronic underperformance.” However, this plan comes with the cost of increasing inflation for the future and could prove to be detrimental for us. Yet, QE3 will lower unemployment, causing me to believe it is beneficial to our nation. An alternative I would offer would be reinstating the Glass-Steagall Act, which would not allow banks to invest our money into the stock market. That way, we avoid the cause for our recession in the first place and separate investing from commercial banking. After all, shouldn’t you be the only one able to invest your money into whatever you want.
ReplyDeleteQE3 was made to basically decrease unemployment and make the economy better. QE3 plans to make people spend their money because of the potential increase in prices in the future. The Fed are planning on purchasing mortgaged-backed securities at a rate of 40 billion dollars per month. This plan is similar to QE1 and QE2 but the difference is that there are open-ended purchases. I do believe that this plan will work and lower unemployment and make our economy better.
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ReplyDeleteThe 3 parts of the QE3 are banks will purchase mortgage-backed securities worth $40 billion, and keep the interest rates at the prevailing record low levels until the mid of 2015 and trying to reduce the unemployment rate. I believe this plan can work but to an extent. I mean it seems like it can be the only thing done by the Fed at this point, but at the same time, they are just buying out debt by printing out more money and that makes the debt and inflation increase rapidly.
ReplyDeleteThe alternatives I would offer are to ease entrepenurship majors with some government money to work with, so they can create companies and lots of jobs.
QE3's main purpose is to decrease unemployment by, adding 40 billion to the economy per month via mortage-backed securities; which will ideally keep low interest rates. This is different from other plans because it results in open ended purchases that will allow people to refinance etc. The plan could work, however it is never a good idea to print more money in an attempt to spur the economy. With rapid inflation it could make things worse than they already are. I think the main focus to help spur the economy would be to create more jobs to lower unemployment instead of just throwing money into the economy.
ReplyDeleteQE3 is made up from thee components that are aimed at remaking the economy by doing things like lowering unemployment. Others include purchasing mortgage-backed securities at a rate of $40 billion per month for indefinite time period, having those purchased mortgages lower interest rates, and then, have individuals participate in the economy with their increased capital because of the lower interest rates. So, people will have more freedom to spend in the economy, by helping them obtain mortgages. The main contrast between QE3 and the other ones is that, in theory, QE3 will have the effect of creating an expectation of generally higher asset prices later on down the road. With people believing that prices will increase in the future, Bernanke believes it will incentivize people to go out and spend money now. This increase in spending should lower unemployment while at the same time it stimulates our economy out of its slump, the fact that there is a high probability that this will dramatically increase inflation in the years to come is the down side of this new plan, which could prove to be a catastrophic mistake on part of Bernanke half. However, I do believe that if we are to get our economy back in shape, the first thing we need to answer is the huge unemployment problem that we are facing. Furthermore, introducing money towards job creation will help reduce the current unemployment rate, helping us to ultimately resurface as a dominant economic power.
ReplyDeleteJacob Hochman
DeleteQE3's purpose is to ultimately lower the unemployment rate in America. It plans to do this through the addition of $40 billion into MBS until seeing a substantial decrease in the percent of unemployment. As well as keeping interest rates low which will then allow for more individual capital and increase consumer spending. This plan differs greatly from QE1 and QE2 because QE3 creates a plan to increase asset prices later. I believe this plan can work, but all faith should not be placed in it. It could also cause terrible inflation which would put us in a worse situation than we are already in.
ReplyDeleteQE3 introduces a purchasing program which basically puts $40 billion dollars back into mortgage backed securities. With this, QE3 hopes to lower interest rates which will ultimately increase spending. What makes this plan different from QE1 and QE2 is that it is open-ended. I believe this plan will give a jump start to the economy and in time, people will start to see positive effects. I think people fail to realize everything takes time and you may not see results right away. However, with careful planning and timing to avoid inflation, this plan can work. It will help create more jobs and help to decrease the unemployment rate.
ReplyDeleteDuring QE3 the Fed are planning to purchase mortgage-backed securities worth 40 billion dollars a month. To reduce interest rates and stimulate the housing market. What makes this plan different from the others is they are open-ended purchases. Open ended-purchases will lower interest rates and help more people qualify for mortgages or for refinancing. I believe this plan will benefit our economy. However, we need to fix our problems of unemployment and inflation.
DeleteThe Fed's plan in QE3 is to buy 40 billion dollars worth of mortgage-backed securities every month. This in turn is supposed to lower interest rates and allow more people to qualify for a mortgage. This is turn allows encourages people to increase spending. This plan should greatly reduce unemployment. The biggest difference between QE3 and the first two is the increase in asset prices later. In a position of power I would do my best to stimulate the economy by creating as many new jobs as I could.
ReplyDeleteJaime Caldaro--- In QE3 the Fed are planning to purchase mortgage-backed securities worth 40 billion dollars a month. In an effort to reduce interest rates and stimulate the housing market. What makes this plan different from the others is they are open-ended purchases. Open ended-purchases will lower interest rates and help more people qualify for mortgages or for refinancing. I believe this plan will benefit our economy. However, we need to fix our problem of unemployment.
ReplyDeleteQE3 is comprised of 3 parts: First, the plan initially looks to purchase 40 billion dollars a month of open-ended mortgage-backed-security; second, this part is expected to lower interest rates which will help people qualify for mortgages or refinance, this, in turn, will lead to part three; which is to get people to spend more money. QE3 differs from the other plans because this plan will have the effect of creating an expectation of generally higher asset prices in the future and also that it is an open ended program. I do believe that this plan will help the economy because we need people to buy more rather than keep our money locked up in backs with interest rates that are so low. I would tweak the plan a bit by lowering the amount of assets purchased because this plan will be a catalyst for major inflation in our country so the less inflation, the better.
ReplyDeleteThe three parts of QE3's plan are to purchase open-ended mortgage-backed-security for $40 billion dollars a month. This in turn will lead to lower interest rates which would hopefully spark a movement in the consumers to spend more money now. This plan differs from QE2 and QE1 because it will lower interest rates and create expectations on where short- and long-term rates will be in the future. They are also different because they are open-ended purchases. I believe this plan will work because it will help jump start our economy and decrease unemployment but at the same time, this plan could cause severe inflation rates.
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