What have you always wondered about the economy? Tell Us

Pros and cons of quantitative easing

Jeff Tyler Nov 13, 2010
HTML EMBED:
COPY

Pros and cons of quantitative easing

Jeff Tyler Nov 13, 2010
HTML EMBED:
COPY

TEXT OF STORY

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.

News and information you need, from a source you trust.

In a world where it’s easier to find disinformation than real information, trustworthy journalism is critical to our democracy and our everyday lives. And you rely on Marketplace to be that objective, credible source, each and every day.

This vital work isn’t possible without you. Marketplace is sustained by our community of Investors—listeners, readers, and donors like you who believe that a free press is essential – and worth supporting.

Stand up for independent news—become a Marketplace Investor today with a donation in any amount.