Quantitative easing has become a “trend topic ‘market at the moment. But what about the actual impact of quantitative easing on the financial markets? then why traders always wait at this quantitative easing? A brief explanation of the quantitative easing can I conclude as follows.
The goal of quantitative easing was essentially alone in order to lower the interest rate on the loan and the corporation to be able to get a loan with an affordable interest rate. Quantitative easing is also expected to lure investors to get out of this type of safe investments like bonds (sovereign debt) and can contribute more to the private sector as lending capital to companies and entrepreneurs. Until eventually will raise optimism that the economy has been growing well. Hopes for an improving economy like this that pushed stock prices up rapidly when quantitative easing was announced.
But what happened is not always consistent with what has been planned since the beginning. Where the banks receiving funds from the Fed is not able to disburse loan funds to the public. So the banks would rather use it to speculate in the market. Because it would be more profitable for them. Like the case of JP Morgan ultimately losing billions of dollars as the market speculates on Credit Default Swaps (CDS). Banks in Indonesia also have experienced a case like this, as in the case of bad loans a few years ago. Not to mention if they were involved to speculate in the stock market.
Quantitative Easing can also potentially lead to the risk of inflation in the currency, due to the printing of new money (whether physical or electronic), the record if it is causing price index (price index of goods and services) rose. In addition, Bernanke does not believe quantitative easing will lead to inflation, because so far the level of demand for goods and services in the United States is still very low. If the prism of economics, where a high level of demand will cause prices to go up, and prices go up is what causes inflation, because we need more money to get the goods / services (law of suply and demand).