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the advantages and disadvantages ,if a nation prints too much of money. Watch

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    (Original post by loki276)
    thats not the aim thats just one of the side effects of the fact that you are buying bonds which is gonna increase their prices and therefore decrease their yield, i bet if you were to look at data right after the QE2 you will see yields going down
    On the contrary.

    Treasuries rallied for a month or so given the expectation of QE, however sold off about 2 weeks before QE2 was formally announced, and since, yields aggressively increased.

    My point is very simple. It doesn't matter what you intend. It doesn't matter what a model tells you. It doesn't matter what your lecturer or A-Level text book tells you. QE has never been tried before. No one really knows.
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    (Original post by NothingOnYou)
    On the contrary.

    Treasuries rallied for a month or so given the expectation of QE, however sold off about 2 weeks before QE2 was formally announced, and since, yields aggressively increased.

    My point is very simple. It doesn't matter what you intend. It doesn't matter what a model tells you. It doesn't matter what your lecturer or A-Level text book tells you. QE has never been tried before. No one really knows.
    yes but its simple economics when demand for something rises its prices rise and since QE is buying bonds it will push up its price and therefore lower yield
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    (Original post by loki276)
    yes but its simple economics when demand for something rises its prices rise and since QE is buying bonds it will push up its price and therefore lower yield
    QE provides buying pressure. But what if there's selling pressure against it? And there has been plenty of selling against it...
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    (Original post by NothingOnYou)
    QE provides buying pressure. But what if there's selling pressure against it? And there has been plenty of selling against it...
    Yes but I am assuming ceteris paribus
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    (Original post by loki276)
    Yes but I am assuming ceteris paribus
    What's the point? We don't live in a 'ceteris paribus' world
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    http://traderrog.files.wordpress.com...depression.jpg this happens, money everywhere.
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    Hyperinflation is the extreme of this. Its possible for a nation to print too much money and not get hyperinflation. Money is neutral in the medium run so you will just settle down to a medium run equilibrium, with a higher rate of inflation than you did before.

    If you increased nominal money growth then you would probably get an increase in output in the short run and a fall in unemployment in the short run, you would also get a short run drop in interest rates, and you would get a rise in prices. However you couldn't consistently maintain lower unemployment through faster monetary growth, if nothing else changed in the labour market then it would return over time to the natural rate and the only thing which would change with faster nominal money growth, is a higher rate of inflation when you are in a medium run equilibrium.
 
 
 
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