Fletcher in the News

"What the Heck is Quantitative Easing?" Prof. Michael Klein Explains for NerdWallet

If you want to sound like a nerd – which we think you very well might – then you must throw the term “QE3” around and we have faith it’ll get you pretty far.  But what does QE3 really mean to you?  Is it us, or does QE3 sound like a sweet video game?

By QE3 we mean Quantitative Easing 3; last Thursday morning the Fed announced a third round of quantitative easing, and the wonky economist blogosphere went wild. ...

... Expert Opinions: Was QE3 necessary and was it a good idea? 

The academic experts weigh in on whether this round will be successful, as well as what positive or negative impacts Americans will start to see from it, if any:

Professor Michael Klein, Professor of International Economic Affairs at Tufts University's Fletcher School, argues that the Fed had to act now, and that it had to get creative to move beyond what hasn’t worked in the past:

“This round of quantitative easing is probably a good thing because our economy is still stalled.  The government has two tools at it disposal to spur economic growth – monetary and fiscal policy – and our government is currently too politically polarized to get any fiscal policy through, for now all we’ve got is monetary.  The Fed can’t do what it would normally do (lower the federal funds rate to lead to other interest rate decreases) because interest rates are already hovering at near zero.  So they’ve had to get innovative and purchase other assets, mortgage-backed securities, to try to impact interest rates at different maturities and longer-term investments: not a typical arrow in the Fed’s quiver."

Read the full interview