In a week that the Middle East lit aflame and the world seemed on the brink of war and chaos, the Federal Reserve announced that it would begin its third round of quantitative easing (QE3) since the economic collapse of 2008. The strategy is to keep interest rates at a bare minimum and â??open endedâ? buying of mortgage backed securities, which is intended to enlarge the amount of cash available, increase liquidity, and stimulate the economy. Most conservative and libertarian economists see this as potential inhibitor to real economic grown at best and also a dangerous flirtation with hyperinflation.
Immediately after the QE3 announcement, stocks and commodities shot up in value. This could, of course, give a short-term and hollow boost to the economy just before the November presidential election. While it is impossible to say whether or not the decision to engage in quantitative easing at this time was used for political purposes, it will most likely have at least some political effect and many Americans will see it that way.
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