Zero Interest Rate Policy (ZIRP), Quantitative Easing (QE), and Operation Twist all provided massive economic stimulus during and after the Great Recession of 2008. This recession cut the United States economy deeper than other economic crisis since World War II. The recovery of our very fragile economy remains at a very slow pace and is still incomplete. This crisis forced numerous central banks to pursue unconventional monetary policies in an attempt to fix our broken economy. Throughout this paper, I will discuss each program as an economic solution to the Great Recession to deter an economic spiral into another Great Depression. Each of these programs have their own economic benefits, as well as some unintended consequences. Over all,
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The Zero Interest Rate Policy is defined as “A route taken by a central bank to keep the base rate at zero percent in an attempt to stimulate demand in the economy by making the supply of money cheaper.” Basically ZIRPs objective was to grow the economy while keeping interest rates as close to zero as possible. The United States is one of many nations that have turned to this very unconventional way of stimulating economic growth after the Great Recession. This program was introduced to the United States in 2008 after the financial crisis caused the Federal Reserve to take action in an attempt fix our broken …show more content…
Every time a loan is given or credit is being used, money is created. Not the actual physical money that we can touch and feel but rather the idea of it for now we are instantly in debt. The creation of money actually lowers the value of each dollar and takes away its purchasing power. In the long run, the Zero Interest Rate Policy by itself has the potential to cause mass chaos within ones economy. The initial effects of Zero Interest Rate Policy used alongside other economy stimulating programs have helped to deter the United States economy from spiraling into another Great Depression. The initial effects of Zero Interest Rate Policy alone did not fix our broken economy and that leads me into the next topic, Quantitative
The Zero Interest Rate Policy is defined as “A route taken by a central bank to keep the base rate at zero percent in an attempt to stimulate demand in the economy by making the supply of money cheaper.” Basically ZIRPs objective was to grow the economy while keeping interest rates as close to zero as possible. The United States is one of many nations that have turned to this very unconventional way of stimulating economic growth after the Great Recession. This program was introduced to the United States in 2008 after the financial crisis caused the Federal Reserve to take action in an attempt fix our broken …show more content…
Every time a loan is given or credit is being used, money is created. Not the actual physical money that we can touch and feel but rather the idea of it for now we are instantly in debt. The creation of money actually lowers the value of each dollar and takes away its purchasing power. In the long run, the Zero Interest Rate Policy by itself has the potential to cause mass chaos within ones economy. The initial effects of Zero Interest Rate Policy used alongside other economy stimulating programs have helped to deter the United States economy from spiraling into another Great Depression. The initial effects of Zero Interest Rate Policy alone did not fix our broken economy and that leads me into the next topic, Quantitative