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Fed Reserve: the Danger of Quantitative Easing #655-3

July 1, 2014No Comments

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Allan Meltzer, Ph.D., American Economist, Senior Fellow, Hoover Institute, and author of a three-volume history of the Federal Reserve, explains that $1 trillion has been added to total reserves, even after reducing reserves by $10 billion per year, and that $2.5 trillion sits idle on banks’ balance sheets. His concern is that adding more reserves just creates enormous problems for the future, and that trillions of dollars will have to be absorbed back into the system without creating another inflation or recession, and creating chaos in  the world. Meltzer divulges that when prices go up on existing capital, it’s a signal to the market to invest in new capital, and it’s relatively cheap, but that’s not happening, and there have been 28 consecutive quarters of very low investment, mostly in labor-saving equipment. He states that unemployment rates have gone down, but mostly because many people have left the labor force, discouraged, and it doesn’t make for a sound economy.

 

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