Monetary policy in America

The article Monetary policy in America: Taper tiger discusses monetary policy in America and the decision of the Federal Open Market Committee (FOMC) regarding the direction of the monetary policy. The article was written on 21 September 2013
and report on a decision reached by FOMC on the 18th of the same month. The article is available in the print version of The Economist titled; The Weakened West. An electronic version of the article is available in their website, www.economist.com. The global economic crisis of 2008 resulted in the government resolving to stimulate growth using the policy of quantitative easing (QE). Every month the government buys treasury and mortgage bonds worth 85 billion dollars. This was expected to stop by the end of September but FOMC surprised everyone when they announced the government would continue buying bonds until mid-2014.
The author of the article not only report on the decision of the FOMC to continue buying bonds, he also give possible reasons for the decision and the effects so far manifested. The United States government is undertaking the biggest economic experiment in modern history. The decisions the government make affect the global economy. The writer of the article suggests that indication pointed to a possible tapper by the end of the ninth month. The Federal Reserve use facts and statistics to reach decisions. To suggest otherwise without statistical data is to make ungrounded claims. The article addresses the issues of inflation and deflation with vague data. The article considers only the possibility in which the quantitative easing policy succeeds. There is a possibility of the policy failing. The United States of America is the largest economy in the world. The FOMC leads the way and other developing economies follow. A failure of the QE policy would result in an unprecedented global economic collapse.
QE is a government policy that involves printing of money to buy bonds and stimulate the growth of the economy. The Federal Reserve provides liquidity to the banks. In the last five years, the government has pumped three trillion dollars directly into the economy through treasury bonds. The money is channeled through local main street banks. The effect of this money on the economy is yet to be realized fully. Most of the money the government has pumped into the economy to revive it remains with the shareholders of the stock market. This comprise mostly of the rich few in the society. The majority poor and middle class are likely to suffer inflation because of increased liquidity in the future as the money trickles further into the economy.
The quantitative easing policy threatens the position of the US dollar in the world economy. The US dollar is the world reserve currency and many nations hold and use the dollar for trade in the international market. The continuous printing of money by Federal Reserve to stimulate growth may result in inflation and devaluation of the US currency. Other countries in the world will eventually lose faith in holding US currency denominated debts. From the article, one of the positive aspects of the QE policy is increased employment. A closer look on the employment statistics reveals an increase in employment but only in the part-time sector. The jobs created are low skill and low pay. These part-time jobs do not generate enough income to sustain the spending needed to maintain property market prices. The article only focuses on the percentages the FOMC give as target for the end of the QE and the raising of the borrowing rates, however, the specific nature of unemployment in the country are lacking.
The article focuses on reporting the recent developments in the United States monetary policy. Suggesting that the decision of the Federal Reserve to keep buying treasury and mortgage bonds is surprising is misleading. A review of economic data reveals a recovering economy, however, a closer look at the details reveal a troubling situation. Ultimately, the results of the QE policy will depend on how well the government manages the resulting inflation.