The 411 on QE3


by Stephanie Berenbaum – September 19th, 2012

Why is Quantitative Easing so Hard to Understand?

If you’re anything like us, you’ve taken a couple precious minutes out of your day to watch South Korean pop music phenomenon Psy’s “Gangnam Style” music video.  So we think you should probably devote at least that much time to something that may just impact your life even more than Psy’s incredibly addictive song and lasso moves.  That’s right – we’re talking about Quantitative Easing!

As you might have heard, Quantitative Easing is a major economic stimulus plan announced last week by the Fed, but how many of us really know what it means?

Why Should You Care, Anyway?

Ok – before you tune us out – bear this in mind – if you like to be employed and in turn have money to shop, then QE3 should be of great interest to you!  That’s because it is a huge economic stimulus plan being enacted to help our economy get moving again.  Think about it and soon you’ll be following Ben Bernanke’s words as closely as Anna Wintour’s!

The Fab & Fru Nutshell Version

Again, this is Fab & Fru (not The Economist) but here’s our understanding of QE3:

1) The Federal Reserve is headed by a man named Ben Bernanke.  The Fed controls monetary policy decisions that affect the economy, and thus impact YOUR everyday life.

2) Its called QE3 because it is the 3rd time since the “Great Recession” started that some sort of quantitative easing has been enacted.

3)The plan is to have the Fed buy $40 billion in securities a month to stimulate the economy.  The theory is that if the government buys securities from banks those banks will have extra money and will in turn loan that money to consumers and businesses which will increase spending and hiring and get the job market moving.

5) While this is a bold move, don’t start celebrating just yet.  The Fed is doing this because other attempts at stimulating the economy have failed!  So, be aware: if things were not very bad they would not be doing this.

Class Dismissed

That’s all the time we have for our very brief Fab & Fru economics course today.  But remember – the big picture economy directly impacts your personal finances – which is why it pays to pay attention to the economic decisions our leaders are making!

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