When Money Stops Talking
Notes on the Week Ahead
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The Fed's Use of Quantitative Easing to Stimulate the Money Supply
When the economy gets into trouble, the Fed both cuts short-term interest rates and engages in quantitative easing which boosts the money supply. But how could an increase in the money supply actually predict a decline in economic activity? This may have something to do with the Fed's use of quantitative easing as a cut's interest rates. Prior to the great financial crisis, the whole idea of quantitative easing hadn't been tried since the 1950s. However, in recent years it's become part of the Fed's standard toolkit.
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