How will the federal reserve affect stocks for dummies. What effect will the fed have on stocks for dummies. Buying stocks for dummies means that investors must keep a close eye on what the fed and Ben Bernanke are doing.
The world has changed since the Federal Reserve, the U.S. central bank, decided in November to buy $ 600 billion more in U.S. Treasury bonds to raise the country’s economy.
The U.S. economy looks stronger. The government is unexpectedly cutting taxes. The Fed still faces stiff political criticism at home and abroad. Partly as a consequence of these developments, the interest rate so long term that the Fed is trying to keep downtown is rising.
This changes the belief the Fed on the program of “quantitative easing”, which the Americans also call the QE2? The short answer is: if the Fed knew in November that he knows now, that would have made the tough decision even more difficult, but there is a good chance he would have gone ahead anyway. Moreover, it is unlikely to change course now, unless there is a much greater improvement of economic prospects or acceleration of inflation. Most stocks for dummies traders believe that the general economy should get better in 2011.
Several Fed officials believe that – even with the most optimistic assumptions for growth and tax cuts – the economy still needs help because he has still lost ground to recover. The Fed is expected that it will take five years or more for inflation and unemployment to be consistent with goals. This is something that stocks for dummies traders need to be aware of in the long term.
The QE2 still seems justified, “unless you believed the economy was on a path of strong growth and that inflation would soon be in an uptrend,” said Donald Kohn, a Brookings Institution scholar who retired from the Fed September. He thinks the plan is justified as the fed will affect stocks by its interest rate policy.
The Fed chairman, Ben Bernanke, described his decision to board the QE2 as a balance between benefits and costs. Today, the costs seem a little higher and the benefits more ambiguous, but the rewards have not changed enough to alter the position of the Fed – or cause much regret in Bernanke.
On the benefit side, Bernanke said the purchases would raise the prices of government bonds of long term and thus push down his return and other interest rates long term. This also meant driving investors to stocks and bonds of companies – raising their prices, largely by improving financial conditions and stimulating investment and spending. Although the Fed can minimize this, it is expected the the dollar will fall and help exports and the best stocks for dummies traders will be ready for this.