Inflation - of inflation”.(Mauldin). To act against the...

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Akash Dalsania Reeves 30 September 2010 Inflation The recession that is being faced today has overwhelmed the U.S. government and the Federal Reserve. The Federal Reserve and government are constantly trying to use their fiscal and monetary policies to counter the recession. To fight the Recession the Federal Reserve is acting on an easy monetary policy to make inflation in the U.S. rise. Deflation is usually the cause of a recession so in response the Federal Reserve reasons to counteract that by increasing inflation. The two main goals for Federal Reserve as of now are to maximize employment and stabilize prices. In 2002 Ben Bernanke had made a famous speech in which he stated that he would not let deflation happen and he said that the Federal Reserve had all the right tools to fight it, but in fact the crisis became more serious and now we are at the Recession we face today. David Greenlaw from Morgan Stanley stated that “the sign of growth in economic activity is a leading indicator
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Unformatted text preview: of inflation”.(Mauldin). To act against the Recession the Federal Reserve also had an idea to buy trillions of dollars of government debt so that more money could be injected into the economy increasing inflation, an idea that is called Quantitative Easing. Quantitative Easing would lower treasury yields, increase GDP, and higher employment. As a result people would by more and also invest more because the borrowing cost will be lower. But Bernanke has said that we will not face deflation many times yet we still are. The problem is that the Federal Reserve focuses too much on the short term instead of the long term solutions. Mauldin, John. "The Fed Pushes On A String As It Ponders How To Create Inflation - Intelligent Investing - Ideas from Forbes Investor Team - Forbes." Forbes . Sept.-Oct. 2010. Web. 30 Sept. 2010. <http://blogs.forbes.com/investor/2010/09/27/the-fed-pushes-on-a-string-as-it-ponders-how-to-create-inflation/>....
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This note was uploaded on 03/26/2011 for the course ECON 0146010010 taught by Professor Allisonfranzese during the Spring '11 term at Rutgers.

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Inflation - of inflation”.(Mauldin). To act against the...

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