QE2: A $ 600 Billion or a $ 1 Trillion?

QE2: A $ 600 Billion or a $ 1 Trillion Money Printing out of thin air?

Recently all the news papers and media are flooded with the news headline that, Federal government has declared the Quantitative Easing 2 of US $ 600 Billion. And under this QE2, the Fed reserve will buy US $ 75 Billion of treasury bonds every month until the middle of 2011 and by doing this, it will print literally US $ 600 Billion out of thin air.

But well, When I visited to the website – NewyorkFed.org,

I was really shocked. Basically according to the Ney York Fed’s statement, its not just the US $ 600 Billion of money printing. But actually it will be US $ 850-900 Billion means almost $ 1 Trillion of QE2.

The New York Fed plans to purchase securities worth $850 to $900 billion in the second round of quantitative easing.

It works like this: There will be an additional amount of purchases worth $600 billion (that's the headline number from the Fed today).

But there will also be a reinvestment of $250 to $300 billion from payments associated with other securities it already holds.

That makes QE2 feel a whole lot bigger, and closer to the top end $1 trillion number that was mentioned.

Thus, all the news paper headlines are basically misleading. Actually the Federal government is going to print much more money than we think. It’s another $ 1 Trillion money which will be created out of thin air and pushed it into the circulation.

Unfortunately, this newly printed money will cause financial disasters in the emerging economies like India, china, Japan and Hong Kong.