November 1st, 2010
12:24 PM GMT
Share this on:

Hong Kong, China (CNN) - Markets all over the world are watching the Fed.  The U.S. Federal Reserve is expected to take further action this week to support America's weak recovery.  Investors are waiting for a second round of "quantitative easing" - what is being nicknamed "QE2."

Say what?

Quantitative easing is a way central bankers can help boost economic growth.  It's a little controversial, but the idea is to create money out of nothing and to get it in the hands of bankers, businessmen, and consumers to spur economic activity.

So how does it work?

Well, the central bank kind of goes shopping.  The Fed, for example, will knock on the door of a bank and offer to buy up government bonds that the bank can't unload at a decent price.  The Fed buys the bonds with cash it's created and - voila! - the bank now has a pile of cash.  The hope is that the bank lends out the money so companies can grow and consumers spend.

The problem is QE doesn't always work.  Banks sometimes get nervous and hoard the cash.  The Fed though is running out of options.  It's hoping that QE2, like a cruise liner, will help transport its passengers through this rough economic patch.


soundoff (32 Responses)
  1. G Richard

    Nothing wrong with the metaphor, but your picture is of the Queen Mary 2

    November 2, 2010 at 9:17 am |
  2. kevin

    GO USA! ! ! Print dollar and give it to our own banks!!!

    The value of dollar reserved by Europe, Japan, India, China..... will drop dramaticly.

    It's good for us!!!

    November 2, 2010 at 9:30 am |
  3. kevin

    GO USA! ! ! Print dollar and give it to our own banks!!!

    The value of dollar reserved by Europe, Japan, India, China..... will drop dramaticly.

    It's good for us, f u c k them up!!!

    November 2, 2010 at 9:52 am |
  4. kevin

    CNN, don't censor my comment !

    you deleted some of my comments !!

    Cheater Network News !!

    November 2, 2010 at 9:55 am |
  5. Pat

    Why not just print money and hand it out to the consumers while we're at it?

    November 2, 2010 at 10:03 am |
  6. virj

    @Kevin: your sick mentality is the reason why the US is the way it is today. If the US were nice to others, other would be nice to the US. The US and unfortunaltely, many of its citizens seems to enjoy it when others are down. Now it seems that it is your turn und now you don't have any friends. Well, what goes around, comes around. You deserved all what you get and, Europe, Japan, China and India are all going to be just fine because they are not all jerks!

    November 2, 2010 at 11:07 am |
  7. Sean

    It also means the value of the dollar will drop, and anything purchased from abroad will get more expensive for people in the US. (Like, for instance, oil?)

    November 2, 2010 at 11:07 am |
  8. PJB

    Why make it seem like the Federal Reserve will now make money out of thin air? That is what they do all the time and charge interest for the privilege! Fractional reserve banking is a scam and a crime. Makes the banks and bankers rich while endebting and impoverishing the populace who are obliged to live with the consequences.
    Force congress to live up to its constitutional obligation to create the coin of the realm and return bankers to their jobs as money changers, not money creators and debt enslavers. Aren't you tired of being in debt, yet?

    November 2, 2010 at 11:22 am |
  9. bradley

    Liars Dice? Ponzi Scheme? It is jmust smoke and mirrors–the FED doesn't actually have any money. Soon the green back will come in rolls and you know what they are for.

    November 2, 2010 at 11:30 am |
  10. kosala

    aaahhhhh ...free money for everyone !!

    and Richard Q is A DOLT !!!!!!!!!!!!!

    November 2, 2010 at 12:07 pm |
  11. Angela

    So, the Fed is going to devalue the dollar, prices will go up because the dollar has lost more "value", inflation will go up, the Fed will raise interest rates.....
    And all this to get consumers to buy more, add to their debt, and continue to support the banking system with its extremely questionable business practices?

    November 2, 2010 at 1:34 pm |
  12. Novia

    shame US
    every peny we earnd from US is based on the hard working of our people,
    what you do is plunder !

    November 2, 2010 at 2:01 pm |
  13. Abu

    Quick! Blame China again. Blame China that we are printing more US Dollars. Yes it is all their fault.

    November 2, 2010 at 3:52 pm |
  14. Robert

    its just a matter of time for the "bomb" to explode... by doing this, the fed is delaying the crash and making it bigger! inflation will take down all savings, people will not be able to pay for these new loans issued with the new money ( with no monetary backup). The debt will grow even bigger......

    November 2, 2010 at 5:38 pm |
  15. tim

    Yes , make the dollar like a garbage!

    November 2, 2010 at 7:51 pm |
  16. Andrew

    This is insanity. It's just a different name for devaluing the dollar, and keeping the crazy strategy of "consumerism" going.

    It only delays the crash, and makes it bigger when it occurs. Essentially, they are kicking the can a little further down the street.

    You can't fix things, until you admit that they are broken.

    November 3, 2010 at 3:16 am |
  17. Andrew

    Here's some real solutions.

    1. Scrap the Federal Reserve, and make the government print the countries money.
    2. Return to a gold and silver standard so it is harder to deflate and inflate the dollar.
    3. End the corrupt Fractional Reserve system.
    4. Stop spending and start saving.
    5. Stop consuming and start producing.

    That's just 5 out of many ways to improve America.

    November 3, 2010 at 3:20 am |
  18. john-jones

    Printing more money will only devalue the Dollar more...Instead why not the government help the people pay their debt, and not by giving more money to the "shark" banks.

    Get the money from else where, not by making more money and inflate its value...Give penalty to China by not buying their products!

    November 3, 2010 at 10:10 am |
  19. Jimmy S.

    This is madness. Again the Fed prints money with the intent to "stimulate" the economy, which will only devalue the dollar, our earnings, our savings and our property.

    In another time & another place, Bernanke would go to the gallows or the guillotine. End the Fed.

    November 3, 2010 at 8:08 pm |
  20. Eeek

    It's a little controversial. We're already trying to stockpile a years worth of food in the garage...

    November 4, 2010 at 1:31 am |
  21. Eeek

    Shouldn't we just say no to the Federal Reserve and central banks?

    November 4, 2010 at 1:33 am |
  22. Eeek

    According to zeitgeist on youtube, the U.S. Federal Reserve isn't even american. more like a world bank.

    November 4, 2010 at 1:35 am |
  23. Eeek

    G Richard: are you sure its not The Titanic?

    November 4, 2010 at 1:36 am |
  24. Eeek

    Let's just say no to the Federal Reserve and find something else to do. (Stop sending our jobs to china, and stop getting our broccoli from china for example.)

    November 4, 2010 at 1:38 am |
  25. Eeek

    Not that they don't have great broccoli and not that they aren't very nice people. but...seriously...this is dumb.

    November 4, 2010 at 1:39 am |
  26. kk

    You can always sell your gold... oppsss, thats gone already. So sell Alsaka.

    November 4, 2010 at 2:12 am |
  27. Steve

    Letter to Bernanke,

    Good luck with your economy that is based on a system that consists of consumers who print their own money based on their writing IOU’s that they cannot pay except by using script that they have printed themselves. If successful, you will be the first person in the history of the world who has made such a system work. On the other hand, if not, your name will join a long list of the despised who were responsible for the chaos and violence that their societies suffered as the result of their doing that in which you are engaging.

    and a comment to the US readers of this:

    Taxation, inflation, repudiation and conquest. These are what you get more of when you increase government spending to unsustainable levels. When your standard of living declines to that of a Chinese coolie, you will have no one to blame but yourselves, because by allowing your government to do what the Fed is proposing you will guarantee that decline. And, please, do not delude yourselves into thinking that your children or your grandchildren will be paying the debt. You will be paying it until the system collapses, taking your savings and your property with it and leaving you with nothing. You ever hear the expression, "root, hog, or die"? You are about to learn what it means.

    November 4, 2010 at 5:01 am |
  28. GEORGE ARGIRIOU

    HI, I AM AN ENGINEER STUDENT IN GREECE.I HAVE A THEORY ABOUT THE WORLD ECONOMY.LETS SAY THAT WE CONSTRUCT AN OUTFIT LIKE THE IMF WICH INSTEAD OF LOANING MONEY 2 COUNTRYS IT WILL CREATE MONEY FROM NOTHING AND WILL ADMINISTREIT IT 2 EACH PEOPLE ANALOGICALY WITH THE COUNTRY AND THE MONEY STATUS.4 EXAMPLE LETS SAY I TAKE 1000 EUROS A MONTH.IF THIS OUTFIT GIVE ME 2000 EUROS WILL I STOP WORKING?NO.I WILL KNOW THAT IN TIME IT WILL GIVE ME ANOTHER AMMOUNT OF MONEY.SO THE 2000 EUROS I WILL GIVE TO BUY PRODUCTS THAT R PLEANTY IN THE MARKET.OFCOURCE THE PRICES WILL FALL AND THE MARKETS WILL MOVE 100%.EVEN THE VERY RICH PEOPLE WILL GET BIG MONEY AND THE WILL B RICHER.SO EVERY1 WILL GET MONEY THE MARKETS WILL MOVE AND EVERY1 IS HAPPY.THE ECONOMICAL SYSTEM WILL REMAIN THE SAME BUT IT WILL WORK BETTER 4 EVERY1 COUSE THE MARKETS WILL WORK 100%.CAN ANY1 SHOW ME WHERE I' VE GOT IT WRONG COUSE IT SEEMS RIGHT 2 ME.

    November 7, 2010 at 7:33 am |
  29. GEORGE ARGIRIOU

    THE MONEY CAN B ADMINISTRATED IN A WAY THAT THERE WILL B A VERY SMALL DESTABILISATION WICH IS EXEPTABLE COMPERED WITH WHAT IS GOING ON NOW.

    November 7, 2010 at 1:37 pm |
  30. GEORGE ARGIRIOU

    WITH THIS GRAMMAR I DO NOT THINK THAT IT WILL B PRINTED.

    November 7, 2010 at 1:40 pm |
  31. vic baska

    If one catholic or one baptist or one morman or one methodist etc..was on the board of governers of the federal reserve, QE2 might work.

    November 7, 2010 at 10:44 pm |
  32. J.Stoneley

    What's religion got to do with it? If anything, its probably the self righteous Christians that's the issue, get Jews on the board, they did good enough to give Germany an powerful economy/reserve up to the first world war, where other wise they would have been screwed, and made Israel rather well off.

    A return to a gold standard and silver coinage is a start to the answer.
    As is allowing the current banking system to completely collapse, and replacing it with, as someone already mentioned, money changers.

    November 14, 2010 at 10:02 am |

Post a comment


 

CNN welcomes a lively and courteous discussion as long as you follow the Rules of Conduct set forth in our Terms of Service. Comments are not pre-screened before they post. You agree that anything you post may be used, along with your name and profile picture, in accordance with our Privacy Policy and the license you have granted pursuant to our Terms of Service.

About Business 360

CNN International's business anchors and correspondents get to grips with the issues affecting world business, and they want your questions and feedback.

 
 
Powered by WordPress.com VIP