“The Federal Reserve’s decision to beef up an existing monetary stimulus program may in reality be little more than a move to prevent stock prices from collapsing, said Robert Wiedemer, financial commentator and best-selling author of “Aftershock.”
At its December monetary policy meeting, the Fed announced plans to bolster its current quantitative easing (QE) program, a monetary stimulus tool that sees the U.S. central bank buy $40 billion in mortgage-backed securities a month from banks on an open-ended basis to spur recovery.
Going forward, the Fed will now purchase an additional $45 billion in Treasury holdings from financial institutions alongside its purchases of mortgage debt.
QE functions by pumping liquidity into the economy in a way that keeps interest rates low to encourage investing and hiring, with rising stock prices and a weaker dollar as side effects….”
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