My economics professor told me that "money always seems free in time of an economic crisis." Although it was 17 years ago, I still remember to this day. At that time, I did not know what it meant or at least I did not realize its implications.
Known as QE2, the Federal Reserve is serving a continental buffet to fight against deflation expectation and high unemployment. Indirectly, the fed is supporting a cheaper dollar. They want a favorable terms of trade, higher exports to stimulate domestic growth, and a higher stock prices. Hopefully, the cheap money will trickle down to stimulate aggregate demand to the "man on the street".
So far, domestic and international stock market indexes around the world are up. Investors are happy to be invited to this free buffet. However, is it really free?
Experts argue that it will drive up prices of commodities, which eventually will rears its ugly inflationary head. Emerging market economies are operating at full potential and employment and fear of an overheating economy. Brazil instituted capital controls and others are finding ways to do the same.
Furthermore, the German Bundesbank President called the Fed "clueless."
Hopefully, everyone donates a little to the buffet so it is not a total economic lost.
