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Quantitative easing

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by Paddy Hirsch
Monday, December 22, 2008 - 22:16

Now the Federal Reserve has effectively cut the target lending rate to zero, it only has one more weapon in its arsenal. Quantitative easing. Senior Editor Paddy Hirsch explains what this "nuclear option" it is, and what the Fed hopes it'll do.

About the author

Paddy Hirsch is the Senior Producer, Personal Finance at Marketplace and the creator and host of the Marketplace Whiteboard. Follow Paddy on Twitter @paddyhirsch and on facebook at www.facebook.com/paddyhirsch101
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Thomas Peterson's picture
Thomas Peterson - Jan 13, 2009

To: Ash Hasan
Hello, what happens when the FED buys treasuries is that it drives up the price of the bonds. The price of a bond and its yield are inversely related.
I hope this helps.

Ash Hasan's picture
Ash Hasan - Jan 12, 2009

A question then, if the the FED is buying the Treasuries and as it does so, shouldnt that bring the yield higher because it is taking the supply out of the flot.

Joyce c's picture
Joyce c - Jan 11, 2009

very helpful

Robert Abraham's picture
Robert Abraham - Jan 10, 2009

There are some inaccuracies, I believe, in this video.

The Fed Funds Target Rate is simply the interest rate that the Fed wants member banks lend to each other, rather than the interest rate that banks lend to the public.

And the Treasury does not "create money". Only the Fed has that ability. That being the case, if the Treasury is buying troubled assets directly from banks, where is it getting the money from?

The Federal Reserve Website has a great interactive tutorial on how it conducts monetary policy here:

http://www.federalreserveeducation.org/fed101/index.htm?CFID=2357250&CFT...

Rukshan Fernando's picture
Rukshan Fernando - Jan 10, 2009

Along with Planet Money, you guys are providing vital information which helps to uncode all of the economic jargon which is keeping people on the outside looking in. Without this information, people may not be more aware of their financial choices and the ramifications of the current market. Thanks so much. I'm glad that I can keep my goal to never get any information from CNBC. :)

Robert Lakin's picture
Robert Lakin - Jan 8, 2009

Content is great. Presenter, equally so. But production values suck. Marketplace, can't you spring for a clip-on microphone and a tripod?

staci li's picture
staci li - Jan 7, 2009

These whiteboard explanations are great. Thank you so much. How can I get into contact with Paddy Hirsch?

Nick Muchi's picture
Nick Muchi - Jan 7, 2009

Excellent piece of work... i am in loss of words. I have learnd alot 2day.. thank u!

Renee Kofi-Bruce's picture
Renee Kofi-Bruce - Jan 5, 2009

Thanks, these are really good explanations -- apolitical too!

I think they should be dated though.

Peter Carmen's picture
Peter Carmen - Jan 5, 2009

Is there any way to RSS feed these videos or have them e-mailed? Thanks so much.

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