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QE2: Pushing Us Into Risky Investments Without Helping The Economy

Tuesday, October 26, 2010 - 4:52 PM
Mohamed El-Erian, chief executive officer of Pimco, had an interesting quote about the Fed's expected QE2 in a CNBC interview:
"QE is meant to drive down the price of safe assets so much that we are all pushed into doing something risky,"

He also doesn't see it helping the economy. Why pursue QE2? According to El-Erian, the Fed is "terrified" of deflation.
Ken TuminKen Tumin5,471 posts since
Nov 29, 2009
Rep Points: 125,634
1. Wednesday, October 27, 2010 - 3:26 PM
Of course the Fed intends to do it's best in handing Wall Street all the funds of savers. I'm not surprised that QE2 is meant to drive the last nail into the coffin of deposit accounts. The threat of higher inflation is minimal so the Fed is using the level of the stock market as a defining measure of their success regarding the economy. If low interest rates would have generated more jobs and more homes being purchased they would have occurred already. Bernanke sees a revised stock market, generating a feeling of wealth among Americans,  consequently creating increased consumer spending, in turn creating jobs. The Fed's plan for a higher stock market requires the infusion of billions of dollars from those savers holding out on putting their funds at risk. When 5-year certificates of deposit are forced down to the 1% yield level, the Fed will probably have succeeded.
PurplesagePurplesage25 posts since
Oct 11, 2010
Rep Points: 73