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QE's side-effects

Quantitative easing (QE) arouses more passionate argument than the rather bland term for money printing should probably provoke. The use of bond buying to suppress long-term interest rates on bonds was supposed to underpin the value of other asset classes, with the resulting confidence boost a way of getting credit moving in the wider economy. This has taken on an aura of mantra, particularly at the Federal Reserve, which has committed itself to buying $85bn (£53bn) of securities a month for seemingly as long as it takes to get the US economy moving. The problem is that such an untried monetary device is clearly causing previously unforeseen distortions in other parts of the financial system as investors are forced to hunt for yield.

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By Julian Hofmann,
12 December 2012

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