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Chucking the buck

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Quantitiative easing, the Fed and the Bank of England creating money to buy government bonds, is creating the liquidity the surplus dollars and pounds that are lowering the two currencies value. But as the Economist notes there is no easy exit strategies for the two central banks, as abandoning QE would lead to asharp rise in bond yields, continuing it would maintain dollar weakness. WIth the dollar's uncertain situation, the growing deficit, and low interest rates allowing QE to continue, the Economist sees an eventual breakdown of current currency arrangements, and the emergence of anew currency system similiar to Bretton Woods.

Quantitiative easing, the Federal Reserve creating money to buy government bonds, is creating surplus dollars and pounds.

09/24/2009

QE is likely to continue as the central banks of the USA and U.K. have no easy exit strategies.

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Chucking the buck

Economist 09/24/2009

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