Timothy Day Responds to Economic Risks Posed by Easy Money Resolutions

Share Article

Recent decisions imposed by The Federal Reserve have left many concerned about the possibility of “easy money,” or cash injection solutions, which could further deteriorate the economy. Timothy Day, recognized economist, assesses these decisions and their potential impact.

According to a recent article from Forbes, recent decisions from the Federal Reserve could stand to impair the overall state of the American economy, especially the risk presented if the government decided to inject money into the market. While the Federal Reserve has yet to resort to “helicopter money,” many believe that the threat of its introduction is present. The article reports one decision that hints at this result, “In entering its fourth round of quantitative easing, the Fed will buy $85 billion worth of mortgage backed securities and longer-term Treasuries per month until expected inflation reaches 2.5 percent, or unemployment falls to 6.5 percent. The Fed’s macroeconomic models predict those thresholds won’t be reached until mid-2015.” Economist and financial expert Timothy Day explains why this move would not only prove damaging to the United States economy, but would also gain a reverse affect from citizens impacted with the new streams of money.

The article explains that the Federal Reserve could end up making the decision to “use the printing press to stimulate the economy by directly injecting new money into the spending stream without relying on lower interest rates and the financial system.” While this decision may be made in order to encourage employment and restore economic confidence, Timothy Day notes that this will most likely not be the case. Following a similar sentiment, the article states, “There is no evidence that easy money reduces unemployment or promotes long-run growth; but there is abundant evidence that excess money growth creates inflation and increases unemployment.” As evidence, Forbes refers to a “helicopter drop” experiment that occurred in Zimbabwe and failed only to result in to the loss of personal and economic freedom following hyperinflation.

Having assessed multiple economic patterns through his career, Timothy Day asserts his lack of faith in the direction the Federal Reserve is pointed. He concludes with evidence, “The Federal Reserve’s mistaken belief that it can induce banks to increase lending, and persuade consumers and business to increase spending through its unprecedented expansion of the monetary base is founded on the false premise that it can outsmart the collective wisdom of the markets. To the contrary, market participants fully understand that the $3.0 trillion dollar expansion of the monetary base must ultimately be followed by a comparable contraction in the base in future years in order to avoid massive inflation. The vast uncertainty that the Fed’s misguided policy creates is causing banks, businesses, and consumers alike to hoard any increases in available cash balances rather than put them to productive uses. As a result, the economy continues to languish despite the Fed’s attempts to revive it.”

ABOUT:

Timothy Day is a talented professional who has filled many roles within the professional world of finance and economics. As a respected individual within his career field, he is accomplished as an accountant, manager, transfer pricing economist and educator. Timothy Day has also provided extensive economic knowledge and support in relation to legal matters, multinational projects, and comprehensive financial analyses.

Share article on social media or email:

View article via:

Pdf Print

Contact Author

Catherine Kerry
PR Management Inc.
484-362-9658
Email >