EFFECT OF QUANTITATIVE EASING
Quantitative easing (QE) is an unconventional monetary policy used by central banks to stimulate the national economy when standard monetary policy has become ineffective. A central bank implements quantitative easing by buying financial assets from commercial banks and other private institutions, thus creating money and injecting a pre-determined quantity of money into the economy. This is distinguished from the more usual policy of buying or selling government bonds to change money supply, in order to keep market interest rates at a specified target value.
DEC 2008 TO MAR 2010
$600 TO $750 BILLION
NOV 2010 TO JUN 2011
SEP 2012 TO DEC 2012
$40 BILLION PER MONTH
QE,which not only spur the growth in american economy it also boost commodity prices. Increasing commodities prices adversely effected on emerging market it also boost non productive metal like gold. Following charts showing how brent crude prices increased which is used by rest of the world excluding america and increased gold prices due to QE
Chart of Gold prices
Above graph shows that before announcement of QE 1 by federal reserve gold prices reaches to lower level due to recession in world economy but after announcement of QE1 in dec 2008 from that gold prices are increasing and still increasing due to QE2 and QE3 Chart of Brent Crude
Above chart shows that how QE help brent crude prices increasing.Before announcement of QE1 brent crude reaches to lower level up to $40 per barrel and after announcement of QE1 by American fed it increases and still increased due to QE2 and QE3. In my point of view, Another reason for increasing the commodity prices is speculator speculating on commodity and they have make the heavy exposure on it due to uncertain economic environment . Higher...
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