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(Reuters) - The Federal Reserve said on Friday that it will start buying about $60 billion per month in Treasury bills to ensure “ample reserves” in the banking system, but emphasized the new program does not mark a change in monetary policy.
To execute quantitative easing, central banks increase the supply of money by buying government bonds and other securities. Increasing the supply of money is similar to increasing supply of any other asset—it lowers the cost of money. A lower cost of money means interest rates are lower and banks can lend with easier terms. This strategy is used when interest rates approach zero, at which point central banks have fewer tools to influence economic growth.
The velocity of money is a measurement of the rate at which money is exchanged in an economy. It is the number of times that money moves from one entity to another. It also refers to how much a unit of currency is used in a given period of time. Simply put, it's the rate at which consumers and businesses in an economy collectively spend money. The velocity of money is usually measured as a ratio of gross domestic product (GDP) to a country's M1 or M2 money supply.
It is used to help economists and investors gauge the health and vitality of an economy. High money velocity is usually associated with a healthy, expanding economy. Low money velocity is usually associated with recessions and contractions.
But both sides acknowledge a full resolution to the long-running trade dispute between the world's largest superpowers remains a long ways off.
originally posted by: toysforadults
a reply to: LABTECH767
I'm just waiting for someone to piss off the Germans
originally posted by: conspiracy nut
We have been due for a market correction, I am no economist but we have recessions roughly every 5-10 years, the last recession was 2008 so we're definitely overdue.