Qe2 Vs Quantitative Easing 2

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What Was QE2 or Quantitative Easing 2? Quantitative Easing 2, or QE2 as it is referred to by some, was the effort by the United States Federal Reserve to increase the support for domestic economic activity in the US economy. The Federal Reserve started this effort in August of 2010 by taking the payments that it received on agency debt and agency owned mortgage-backed securities obtained during Quantitative Easing 1 and applying those payments toward investment in longer term Treasury securities. This helped to remove Treasury securities from private hands and put more cash into the economy. The Federal Reserve bought more than $600 billion in long-term Treasury Bonds and reinvested almost another $300 billion from mortgage-backed securities into other Treasury securities. In total, well over $900 billion was spent in the Federal Reserve's QE2 efforts. The theory behind this effort was that the yields would be driven down on Treasury securities and bonds while people would begin to spend more on consumption and investment activities in the domestic economy of…show more content…
In essence, by pushing more money into the economy through the efforts of Quantitative Easing 2, the Federal Reserve devalued the dollars that were already in circulation and ran the risk of causing prices on certain goods and services to rise faster than they would have if QE2 had not happened. This risk for higher inflation has been seen throughout history any time a central bank has used quantitative easing measures to stimulate an economy. One of the most famous cases of severe inflation caused by quantitative easing was the hyperinflation that Germany experienced during the 1930s under the Wiemar Republic. Because Germany's central bank did not effectively manage the inflation caused by its quantitative easing efforts, Germany experienced inflation that reached a rate of well over

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