Thursday, April 7, 2011

Paul Krugman Explains QE2

Economist Paul Krugman explaining QE2 Quantitative Easing 2 at Haverford College speaking event.
"...I was asked what's the FED is doing when it goes out and buys long term bonds , so what it is really doing is buying long term bonds and selling short term bonds , it is using bank reserves which are in effect short term claims on the US Government , or in some cases it is actually selling off it's holding on short term treasuries to buy long term bonds , meanwhile there is the treasury setting out there that is having a bunch of debt some of it long term debt , in effect the federal reserve is building up that short term debt and paying down some of the long term debt , so what's happening is QE2 is basically a reduction of the maturity of federal government debt and I think it works out as something like ten months of the maturity the average maturity of the federal government debt ...."

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