President's Policy - QE2

President's Policy - QE2

Introduction

Economic issues have been the major problem for every country across the world. In this era, US is facing major economic crisis even on the large scale. After 2008 financial crisis, economies of the major countries has suffered a lot including US. The problem with the economy of the world started long before it started in United States. There are several countries in Europe and Asia which faced severe economic recession and depression, which has affected the economy of the United States.

It has been said that the major cause of world economic crisis is due to the President's policy which is also known as QE2. Hence, in this paper we will describe economic issues (pro and/or con) concerning the President's policy.

Discussion

The economy of US in 2010 has been enlarged by 3% in real terms as compared to the 4th quarter of 2009 while factoring growth rate is 4%. Regardless of increase in GDP, unemployment rate is same 9.6% in 2010 last quarter. Real positive GDP growth rate with this rate of high unemployment is the clear explanation of growth recession in US and other countries. This has tended a significant increase indebtedness of the U.S. economy. However, the seven main obstacles in 2011 economic progress will express slow real GDP expansion to the 1.5%-2.5% range.

According to FED, the responsible for this recession growth in the countries are due to the President's policy QE2. The reason which has been given by the FED is Liquidity Mistakes, Substitution Effects and lastly the Fiscal Policy in Neutral (Lanham, 2011).

Explanation of the Issues

Liquidity Mistakes

If we look in the past years; the policies by the president in response to rising economic problems had inject more money in the market. This in return created more problems in the market which comprises of:

Failure of Long Term Capital Management

High technology bust in 2000's era

Mild recession that began with a decline in real GDP in the fall of 2000s era

2002-3; Mild deflation

High crisis in the capital market and huge recession and housing implosion of 2007-9, a

Lack of a private sector including recovery of self-sustaining

All these contributed towards the insufficient liquidity in the capital market. Currently, this pumping of liquidity in the marked which was the major decision taken by the president leads to the huge range of asset bubbles which contributed to the aggregate indebtedness of FED.

This ...