QE3How many times have you seen a box of detergent or a bottle of cold medicine that says something like "new and improved" or "more powerful than ever" and wondered whether the contents could live up to the hype on the label? Well, the Federal Reserve's third round of quantitative easing -- known as QE3 -- is all that and more. In fact, if rounds of quantitative easing had slogans, QE3's would be: "Wow! We've never tried anything this powerful before!"

Compared to QE1 and QE2, QE3 is unprecedented in its direction and scope. As such, it's making people across the board nervous, for one familiar reason: the possibility of inflation.

Boldly Going Where No Fed Chair Has Gone Before

Quantitative easing is when the Fed buys securities in the hope of driving down interest rates -- ideally spurring people and businesses to borrow more and spend more. In the case of QE3, the Fed has committed to buying $40 billion of mortgage-backed securities each month.

What makes QE3 different from QE1 or QE2 is that the Fed has put no limit on how long it will keep buying them. Chairman Ben Bernanke has simply said that the Fed will keep buying mortgage-backed securities until the U.S. labor market improves substantially.

As such, QE3 is an open-ended commitment from the Fed to virtually print money. This makes people nervous. And justifiably: Any time you inject massive amounts of money into a country's economy, you risk inflation.

What QE3 Means for You and Me



John Grgurich is a regular contributor to The Motley Fool.


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w_diago

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July 16 2013 at 7:36 AM Report abuse rate up rate down Reply
jsimons4109

Once again the Fed is going to screw the average joe while keeping the banks afloat. As the dollar is devalued even more, the price of all commodities continues to go up becasue they are priced in dollars which now buy less. Big Ben has almost guaranteed $5 a gallon gas. This will ripple throught the economy until there prices become so high that we will have stagflation.
Welcome to the 1970's.

September 19 2012 at 2:39 PM Report abuse +1 rate up rate down Reply
kafienkarl

Republicans have cut the taxes for the poor so that they don't pay income taxes. That's deal that they have made for big corporations that want to keep wages low.

September 19 2012 at 12:47 PM Report abuse -3 rate up rate down Reply
beliale

madness is contagement of instinct

September 19 2012 at 12:46 PM Report abuse -1 rate up rate down Reply
kafienkarl

Not to mention that there remains the outstanding question of whether or not Romney paid US income taxes in any of the years, particularly 2009, for which he has not yet released his tax returns.

In addition, not paying income taxes does not mean not paying taxes. For instance, if you are working and paying into social security and Medicare through payroll taxes you are contributing to earned benefits that will be paid back in the future, not living off the government dole. As for seniors, such as in the state of Florida (which has such a high percentage of non-income tax payers because of its elderly population), is Romney proposing that aged Americans should be taxed on meager Social Security payments that they earned through hard work? Not to mention veterans, students, the disabled, etc.

When Romney talked to his wealthy contributors about 47 percent of the nation being drains upon the public purse -- people who in Romney's words "believe that they are victims" -- he was sticking it into the eyes of his white bastion of support below the Mason-Dixon line: the South.

September 19 2012 at 12:24 PM Report abuse -3 rate up rate down Reply
1 reply to kafienkarl's comment
Herb Nelson

No he is talking about the welfare group who have made it a way of life for generations now. They think they are entitled to the FREE money. That is not what it was intended for and should stop. This includes illegals.

September 19 2012 at 1:27 PM Report abuse rate up rate down Reply
kafienkarl

In fact, the southern states, as BuzzFlash has pointed out before, are subsidized, in government dollars, by the taxpayers of northern blue states. Take a state like Mississippi, which receives more than $2.00 from the government for every dollar it pays into the federal treasury. On the other hand, a blue state such as Obama's Illinois receives only about 75 cents back on each dollar it pays to the federal government, for a net loss.

BuzzFlash at Truthout covered Romney's hypocrisy about the Mississippi federal dependency syndrome in a March 2012 commentary entitled "Mississippi Freeloads on the Back of Blue State Taxpayers for Federal Subsidies to Survive." In that commentary, BuzzFlash at Truthout noted:

In short, the MS state government run out of Jackson is a leech upon the US government, but try telling that to Mitt Romney.

While pandering for votes in Mississippi before the recent presidential primary, Romney declared: "If the federal government were run more like here in Mississippi, the whole country would be a lot better off." Say what?

Romney, the man who would be president, is saying that Washington DC should emulate a state propped up by federal subsidies -- arguably the poorest and least educated state in the Union.

In short, Romney's foundation for any chance of electoral victory is composed basically of welfare states.

September 19 2012 at 12:21 PM Report abuse -3 rate up rate down Reply
kafienkarl

How many states are "red"?
Here, according to the Tax Foundation are the top ten states with percentage of non-filers in 2008:


1 Mississippi

2 Georgia

3 Arkansas

4 New Mexico

5 Alabama

6 South Carolina

7 Louisiana

8 Texas

9 Florida

10 Idaho

September 19 2012 at 12:15 PM Report abuse -2 rate up rate down Reply
kafienkarl

September 18, 2012

Mitt Romney was wrong when he said the 47 percent of Americans who pay no federal income taxes are “dependent on the government.” Most of them are working people who simply do not earn very much money.

Romney also assumed that all of those in the 47 percent who pay no federal income tax vote Democratic. But polling data suggest that’s just not true. President Obama is faring better than Romney among the lowest earners — those most likely to be among the 47 percent who pay no federal income tax — but polls show Romney is supported by some 40 percent of those earning the lowest income. In fact, a healthy chunk of the 47 percent are seniors who tend to vote Republican.

September 19 2012 at 12:15 PM Report abuse -3 rate up rate down Reply
marekl19

Why can't one article simply state what is truly the purpose of printing money. It is a tax. Simple as that. It is a tax on everyone. So in some ways it is fair. You can't tax people who don't pay taxes. But if you devalue the dollar the people who don't pay taxes have less spending power. And the government can keep on spending as much money as it wants, issue bonds and have the Fed buy them and keep on doing business as usual. But all of americans get to spend less so the government can keep spending. What is the difference between this and a tax. The only difference is that a politician can lie to your face and say he isn't raising your taxes. No instead of taking my money openly, the government is making my money worthless. By the way, the rich people that own stuff, well their stuff becomes more valuable, so they don't get hurt. This hurts the poor more. So it is a worse tax on the poor than the rich. Keep on voting for democrats. Fiscal conservatives are fringe people.

September 19 2012 at 12:05 PM Report abuse rate up rate down Reply
kafienkarl

FACTcheck.com

September 18, 2012

Mitt Romney was wrong when he said the 47 percent of Americans who pay no federal income taxes are “dependent on the government.” Most of them are working people who simply do not earn very much money.

Romney also assumed that all of those in the 47 percent who pay no federal income tax vote Democratic. But polling data suggest that’s just not true. President Obama is faring better than Romney among the lowest earners — those most likely to be among the 47 percent who pay no federal income tax — but polls show Romney is supported by some 40 percent of those earning the lowest income. In fact, a healthy chunk of the 47 percent are seniors who tend to vote Republican.

September 19 2012 at 12:02 PM Report abuse -3 rate up rate down Reply