Quantitative Easing Part 2 ("QE2")

["User"]

http://finance.fortune.cnn.com/2010/10/13/qe2-why-is-the-fed-doing-this/

Really now...ANOTHER economic stimulus package? 

Discuss the pros and cons and whether or not you think it's a good idea if it gets implemented cause I'm too lazy right now.

For those who aren't familiar with how Quantitative Easing works read here

[DZComposer]

The problem with the economic slump we're in is not fixable with monetary policy. The credit markets are tight because the banks want to horde money instead of lending, out of fear of low consumer spending.

The problem with speculative markets is that they become self-fulfilling prophecies. If banks think that small business will fail because of sagging consumer demand, they won't lend to small businesses, who in turn can't make payroll and lay off workers, leading to more people and businesses who are in serious financial trouble.

This is where government comes is. Government is the only thing that can stop speculative things like this from becoming reality.

QE isn't the answer. It's too risky, number one, and number two it is just a Band-Aid. We need to treat the cause, not the symptoms. A two-pronged approach is needed. One that focuses on creating jobs, of any kind, and one that forces banks to lend.

For the first prong: In the short term, we have bridges that need to be replaced, roads that need to be re-paved, schools that need to be built, IT infrastructure that needs modernizing, electrical infrastructure that needs modernizing, IE there is a shit-ton of work that needs to be done in this country, and there are a lot of people who need work. I see a way to kill 2 birds with one stone here.

In the long-term, we need to use tax policy to make it less desirable to export labor. Any US-based company that brings a product in from overseas badged with it's name and logo should get taxed enough to make up for the difference in labor costs. This makes exporting labor more expensive than using domestic labor because of shipping costs. To prevent headquarters moving shenanigans like Halliburton pulled, a simple law that says the US government can only do business with US-based companies will make companies think twice about going overseas, as they will lose any lucrative government contracts. Encouraging state and local governments to follow suit strengthens this even more.

For the Second Prong, we need to use tax policies to encourage banks to lend rather than horde cash or invest in too many financial products.  Taxing financial product transactions will make the banks think twice about dumping all of their money into hedge funds. Combine this with tax breaks for banks that lend to small businesses.

[Sabre]

Charlie Brooker did a funny explaination of it, but I cant find a clip.

[Guest Julius Quasar]

Ugh, this is why some people don't pay taxes, whether using legal loopholes or not (Tax Avoidance vs. Tax Evasion).