How is qe2 inflationary

That partly explains why frontier Africa has not had the same sort of inflows that other emerging markets have seen. Frontier African currency strength has not been as evident as in countries like South Africa, Khan said, even though African markets are not bound by stringent capital controls.

But some investors say frontier markets will inevitably benefit from the thrust towards higher yielding assets. Egypt News Updated. By Carolyn Cohn 5 Min Read. The answer is that banks and financial institutions hoarded the money in order to shore up their own balance sheets and regain profitability. Banks still had bad loans and toxic assets on their balance sheets as a result of the housing bubble burst and its aftershocks.

The extra cash on hand made their financial picture look a whole lot better. As the economy has recovered and the fed has begun tapering its interventions, the money being held by banks is being returned to the Fed slowly in the form of interest payments on the debts purchased during QE. Meanwhile, the U. Many feared that QE would spell hyperinflation for the U.

The crisis, however, was largely a deflationary phenomenon and the money being injected into the system by QE, as seen by the spike in the M0 monetary base, was by and large retained by the financial sector, with the more important M2 money supply remained fairly stable. Hyperinflation is an exponential rise in prices and tends to occur not when countries print too much money; instead, it is associated with a collapse in the real underlying economy.

The printing of money is a desperate effort to maintain stability and prevent production from coming to a halt, as what happened in post-WWI Germany and during the s when Mugabe headed the government of Zimbabwe. On the other hand, the U. Monetary Policy. Federal Reserve. Your Privacy Rights. To change or withdraw your consent choices for Investopedia. At any time, you can update your settings through the "EU Privacy" link at the bottom of any page.

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