Pros and cons of quantitative easing

A bond.


STEVE CHIOTAKIS: Here at home, the Federal Reserve today starts its latest round of buying up Treasury bonds. Over the coming months, the Fed will invest $600 billion buying U.S. and corporate debt. What does that mean in practical terms for the average American consumer?

Marketplace's Jeff Tyler tells us where we'll notice the difference.

Jeff Tyler: The Federal Reserve's move has its pros and cons. Interest rates are expected to fall as the Fed snaps up long-term bonds. That's good if you're hunting for a house.

David Wyss is chief economist at Standard & Poors.

David Wyss: You're looking at 4.25 percent mortgages right now, if you do some shopping. I've never seen them like that. Mortgages could get even a little bit cheaper than they already are.

He says other investors will see a downside.

Wyss: The people who are getting hurt by this are retirees, basically, who are trying to live off their capital. They're just not earning much in interest right now. You just can't put that money into a CD and get enough to live on anymore.

The Fed's action will likely reduce the value of the dollar. Wyss says that will bump up the cost of imported goods and travel abroad.

Wyss: It's going to cost you more for that hotel in Paris, and that three-star restaurant may be out of your price range now.

But the cheaper dollar may boost exports. And the Fed hopes that will spur the creation of new jobs.

I'm Jeff Tyler for Marketplace.

About the author

Jeff Tyler is a reporter for Marketplace’s Los Angeles bureau, where he reports on issues related to immigration and Latin America.
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Every aspect of so-called "quantitative easing" is nonsense and I can't believe anybody is buying into this lie.

First, home mortgage rates may be low but since banks are only lending to those who already have mega-bucks in the bank; the average prospective homebuyer has a gnat's chance of getting one of those loans. Fallacy #1.

A weak dollar may help exports except we don't make anything the world wants to buy, any more. Last time I checked, the market for toxic assets fairly small. Ove the past decade-or-so, that's all America has made produced.
Well, that and Pontiacs.
Oh wait, we don't make those any more.

A weak dollar WILL make a few things change, though.
A barrel of imported oil is going up, of course.
The value of remittances to Mexico will go down.
Let's see, what else?

Oh yeah... investments. All that money has to find a home, right?
Dang. Since there's nothing left here to invest in, Bill Hall (above) is right:
Wall Street will take that giant pool of money and invest where there's growth:
China. Brazil. Singapore. India. Everywhere but here.

Where have I heard this story before?
Oh yeah.. QE 1.
Here we go again.
Good thinking Ben.

The only people I can see who really benifit from driving the dollar way down in value are the big Wall Street banks. Right now that is the only way they make money buy playing games, not by really loaning it out even at a million at a time. What does the USA have to see that we are not already selling to others? It effects the average consumer in lots of unseen ways such as at the gas pump. I heard there is a great supply but beacuse of the value of the dollar the price keeps going up.

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