Switch to Desktop Site
 
 

Bernanke's bold QE2 finally explained -- with burgers and fries

Next Previous

Page 2 of 4

About these ads

Some of that cash might be from QE2. When the Federal Reserve buys government bonds in a program like QE2, it pays for them with newly created money that goes into the account of the US Treasury. The money is then available to the US government to pay its many expenses, from road construction to Medicare bills to, perhaps, the salary of a Marine private who deposits his paycheck in the First Huge Bank.

Let’s say First Huge passes mine and the Marine’s QE2 dollars, along with many others, to Mega-Multinational Corporation in the form of a short-term commercial loan.

My dollars may be destined for Shanghai

At this point Federal Reserve Chairman Ben Bernanke rubs his hands together expectantly. This is where policy rubber meets the road. The hope is that Mega-Multinational will build new offices, stores, and factories in the US, hiring workers to staff them and helping bring down the unemployment rate. And with some of the money, something like that may happen. But the economy today is global. Dollar bills, especially the virtual kind, can travel the planet like the Star Trek crew, beaming into and out of wherever the action is deemed to be.

Next Previous

Page 2 of 4

Share