There has been much talk about QE3, but a lot of people don’t know what it is and as a result they tend to ignore it. What exactly is all of this QE stuff and what is it supposed to do? QE is short for “Quantitative Easing” and it is basically a glorified way of saying “inflation”.
The first round of quantitative easing began in the U.S.A. on November 25, 2008 and ended on March 31, 2010. It was implemented to stimulate the U.S. economy after the housing market crash of 2008. With QE1, the Federal Reserve bought agency securities which are securities issued by Fannie Mae, Freddie Mac, Ginnie Mae and the Federal Home Loan Banks, and they also began to buy mortgage-backed securities in an attempt to stimulate the economy. A mortgage-backed security is basically loans on houses and businesses.
What this all means in plain English is that the Federal Reserve began a large-scale asset purchase of mortgages and securities and added them as assets to their balance sheet. This was done to stimulate the banks into making loans which they stopped doing when the housing market crashed. QE1 failed at unlocking the bank lending freeze caused by the housing market crash so the next step the Federal Reserve did was QE2.Credit: Amazon
QE2 began on November 3, 2010 and lasted until June 30, 2011. QE2 was similar to QE1 except that the Federal Reserve Bank bought treasury securities. A treasury security is government bonds, notes and bills. In other words, with quantitative easing 2, the Federal Reserve bought government bonds with “money” that it printed out of thin air.
Just like quantitative easing 1, quantitative easing 2 also proved to be a failure. Because the economy was still very weak, the Feds announced on September 13, 2012 that they would start QE3.
With QE3 the Feds began to buy mortgage-backed securities at the rate of 40 billion dollars per month for an indefinite amount of time. Basically what the Federal Reserve is doing is buying the mortgages of homes and businesses from banks with money that they are producing out of thin air.
Basically what all of this quantitative easing boils down to is inflation. It is one of the main reasons that stuff is becoming more expensive to buy. The longer that the Feds continue with all of this QE stuff the worse inflation will become. This will lead to things becoming more expensive and higher unemployment because fewer people will be buying their products causing them to layoff employees.Credit: Amazon
The big threat with all of this quantitative easing is hyperinflation. That is when the price of goods and services skyrocket because the purchasing power of the currency falls dramatically. When this happens you will see a repeat of the Great Depression. There will be massive unemployment, very little food available and lots of people loosing their houses.
What should you do to protect yourself from all of this QE inflation stuff? The first thing that you should do is pay off all of your loans. If you have a mortgage on your house then pay it off. Not only will this eliminate the risk of you being evicted from your house, it will also remove a layer of fear from your life. Gold and silver are known to be inflation fighters and will help you keep your purchasing power if the fiat paper currency looses its purchasing power.
Another thing that you could consider doing is getting at least a years supply of food. This will help you during hard times if you can’t afford to buy food at the store. As an added advantage to having some food stored, you will have something to eat if your area is hit with a natural disaster such as an earthquake, hurricane, or tornado.
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