Free exchange: Early retirement

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Free exchange


Ending quantitative easing may be penny-wise, pound-foolish

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ON OCTOBER 29th the Federal Reserve said it would end “QE3”: the programme of asset purchases it first announced in September 2012 and began shrinking last December. Quantitative easing, or the buying of assets with newly created money, has been the workhorse of monetary policy since rich-world interest rates fell almost to zero in 2008-09. Despite its expansive use since then, many still see it as an exotic and possibly dangerous monetary tool. They raise three pressing questions: did it work, did it have unacceptable side effects, and was the Fed right to stop?
Though QE is often described as an “unconventional” form of monetary policy (as opposed to mundane adjustments to interest rates), it has actually been in use for some time. The Federal Reserve tried it from 1932 to 1936, and the Bank of Japan in the early 2000s. Both have used it again since the financial crisis, along with the Bank of England.
QE is …

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