North America >> United States: Quantitative easing

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A recent short Wall Street Journal article included a chart that simplistically shows what is said to be the essence of the economic thrust of quantitative easing. The chart, reproduced here, is worth studying and thinking about.

In theory quantitative easing ought to be inflationary, given:

• the money printing required to enable the Federal Reserve to purchase assets generally thought to the be 'less risky' assets; and,
  
• as shown in the table, with extra 'money' in the system, greater investment is expected in perceived 'more risky' assets with resultant job creation and GDP growth.

The best one can say for U.S. quantitative easing to date is that as a result of previous QE policies the American economy may be performing better now than it otherwise would be performing.

That said, things may be as simple as the American economy having been so structurally changed by the post-1995 globalization process that it can't be brought back to anything approximating former levels - irrespective what supposed 'solutions' (QE being one of those) are 'thrown at the wall' to see 'what will stick'.

Topical Reference: How Quantitative Easing Works, from The Wall Street Journal, September 14, 2012 - reading time 2 minutes, thinking time longer.

South America >> Venezuela: Importance of Chavez' re-election as Venezuela President to companies doing business in South America

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On Sunday Hugo Chavez was re-elected President of Venezuela for a further six-year term. The first of the two referenced articles report details. The second raises the issue of the impact this may have on a continuation of other South American 'left-leaning' governments such as Argentina, Bolivia, Brazil and Ecuador (to which list presumably Peru can be added) continuing to look to reduce poverty and equality - in part at least by having to date taken over more control of their energy resources.

Thus, Chavez's re-election arguably speaks to the importance of ever more vigilance being required by those who trade and invest in foreign companies that invest in those South American countries, and the increasing importance of country risk assessments generally.

Topical Reference: Venezuela's Chavez revels in re-election victory, from Reuters, Brian Ellsworth and Helen Murphy, October 8, 2012 - reading time 4 minutes. Also see Chavez Re-Election Continues Trend of Left Governments Re-elected in South America, from Center for Economic and Policy Research, Dan Beeton, October 7, 2012 - reading time 2 minutes.