Quantitative Easing 2 (QE2) is an expansionary monetary policy implemented by the Federal Reserve in late 2010, whereby it increased its balance sheet by $600 billion. Quantitative easing (QE) is a central bank's strategy to increase the domestic money supply by buying certain assets from the market such as government bonds and other financial instruments.
The U.S. Federal Reserve used QE2 as a response to the 2008 financial crisis, in an effort to stimulate the economy, by creating a more positive outlook and providing liquidity to the financial markets. By increasing the balance sheet by $600 billion and buying assets from the market, the Federal Reserve hoped to lower the long-term interest rates, making it easier for businesses, and consumers to borrow money, and stimulate the economy.
By initiating QE2, the Federal Reserve had the assumption that by raising the money supply, productivity and economic growth would increase, thereby easing the financial crisis and bringing it to a more stable level.
By increasing the supply of money, inflation was also a concern. But similar to the other QE programs since the 2008 crisis, the effects of QE2 have been disputed among economists, and its true effects still remain to be seen.
Ultimately, it cannot be denied that the QE2 was an attempt to revamp an ailing economic system, and inject more life into the markets in an effort to create job opportunities, raise growth and eventually lead the country to a new level of economic prosperity. Only time will tell what the effects of the QE2 will be, and how much of an impact it will have had, or if it was successful in achieving its goals.
The U.S. Federal Reserve used QE2 as a response to the 2008 financial crisis, in an effort to stimulate the economy, by creating a more positive outlook and providing liquidity to the financial markets. By increasing the balance sheet by $600 billion and buying assets from the market, the Federal Reserve hoped to lower the long-term interest rates, making it easier for businesses, and consumers to borrow money, and stimulate the economy.
By initiating QE2, the Federal Reserve had the assumption that by raising the money supply, productivity and economic growth would increase, thereby easing the financial crisis and bringing it to a more stable level.
By increasing the supply of money, inflation was also a concern. But similar to the other QE programs since the 2008 crisis, the effects of QE2 have been disputed among economists, and its true effects still remain to be seen.
Ultimately, it cannot be denied that the QE2 was an attempt to revamp an ailing economic system, and inject more life into the markets in an effort to create job opportunities, raise growth and eventually lead the country to a new level of economic prosperity. Only time will tell what the effects of the QE2 will be, and how much of an impact it will have had, or if it was successful in achieving its goals.