EagleTribune.com, North Andover, MA

December 5, 2012

Letter: One student's take on the economy


The Eagle-Tribune

---- — To the editor:

The slow economy is the hot topic nowadays. There is no shortage of wild theories and new schemes to “speed up” the recovery process—but what if what we really need to do is just sit back and wait?

To bolster the sluggish economy, the Federal Reserve has already implemented two rounds of quantitative easing, or the buying of government debt. Currently, the Fed is buying $40 billion in securities each month until unemployment drops to around 5 percent.

Quantitative easing is an expansionary monetary policy that increases the overall money supply while keeping interest rates low.

This is a strategy to encourage consumer borrowing from banks for mortgage loans or other transaction purposes.

An increase in borrowing and consumer spending leads to an increase in business confidence. As businesses increase production to meet consumer demand, more jobs become available, lowering the unemployment rate. Increased production rates also mean an increase in the GDP.

Fed officials are hopeful about the positive effects of quantitative easing on the recovery.

The latest forecasts of the Federal Open Market Committee show an increase in the predicted GDP growth for 2013, up from the 2.2 to 2.8 percent growth rate predicted in June, to 2.5 to 3 percent.

The Great Recession was a dramatic downturn in the economy, and growth will not happen overnight.

At this point, any further intervention by the Fed or the government could risk disrupting the natural recovery process.

Both the government and the general public need to stop with the typical American “Gotta have it now!” mentality and try having a little patience instead. If the Fed continues with quantitative easing, we should see more rapid economic improvement in 2013.

Victoria Spagnuolo

Andover

Spagnuolo is a student at Florida Southern College.