As Economy Fails To Ignite, Fed Prepares Next Round Of Quantitative Easing - Investors.com

Alarmed at the economy's slow pace, the ongoing slump in housing and the threat of European debt defaults, the central bank is preparing a third round of "quantitative easing" — the monetary equivalent of a defibrillator paddle placed on the economy's chest.

This is rather strange, given that the previous two attempts — QE1 and QE2— did little to help the economy. Indeed, those efforts may have so distorted markets and interest rates that they held back the recovery.

But say this for the Fed: It didn't sit on its hands. In those first two QE efforts, it bought $2 trillion of government-backed mortgage securities and federal bonds.

The Fed's idea behind this was to hold down interest rates and boost housing — a necessary prelude to reviving the entire economy. Only problem is, it didn't work.




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