Quantitative Easing, Currency Movement, & the Price of SilverSubmitted by bobbyw24 on Fri, 12/10/2010 - 09:22
In early November, all speculation was laid to rest when Ben Bernanke & Co. formally announced that the Federal Reserve was going to move forward with a second round of Quantitative Easing (QE2) to the tune of $600 billion. Basically, for those unfamiliar with the very scientific and complex process of quantitative easing, it essentially means the Federal Reserve has just created an additional $600 billion out of thin air. It's very similar to a drug addict counterfeiting money in his basement in order to use the fake money to satisfy his drug habit, except the drug addict will go to prison if he gets caught, while it's all good with the Federal Reserve. What a fascinating world we live in.
This current QE2 move has been met with much skepticism and criticism among global leaders such as Germany, China, and Russia. Suffice to say, they are a bit perturbed that the U.S. keeps increasing the number of U.S. dollars at such an incredible rate. These countries argue that QE2 is going to artificially devalue the U.S. dollar, and that it will undoubtedly lead to increased capital flows into emerging markets such as Russia, China, and India.
This upsets these other countries because increased capital flows will result in two things.