Saturday, November 13, 2010
QE2 Just Won't Do
It has been a few weeks since the Fed announced its $600B purchase of government bonds. However, a lot of people are still skeptical of how this will work out. The interviewee in this article, who is successful currency trader, believes that the real culprit is the undervaluation of Chinese currency, and fixing that would be more beneficial than pouring such an amount of money in the economy. China's efforts to prevent its currency from appreciating tip the scale in its favor, leading to millions of job losses in the U.S. He does make a point, but we need to take into account the fact that he is a currency trader.
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2 comments:
I think QE2 will help boost the economy. However, what we see right now, especially in the stock market, is the over-speculation in the Fed's aid. Therefore, it requires a little time to match the expectation with the Fed's help. In addition, the essence of QE2 is time, therefore, it will not be "effective" right away but will hopefully be beneficial in the long run.
I disagree with Mr. Tudor Jones. I think the real culprit is not China. We are blaming China when we are the ones that are at fault. The most "unsustainable economic imbalance in the world today" is not China's trade surplus with the United States, but, rather, the recent exponential widening in the gap between the very wealthy top 2% in this country, a group which certainly includes Mr. Tudor Jones. The last time the gap got this large the world experienced the Great Depression. and remember, the Great Depression, one that led millions of people out of jobs or about 25% unemployment rate.
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