In the arcane world of Fed-watching, last week’s uninspiring labor report appears to have achieved the near-impossible: the likelihood of real action on the economy. In response to sluggish economic growth and persistently high unemployment, there is a widely shared expectation that Ben Bernanke is about to unleash a third round of economy-juicing asset purchases — aka “QE3.” And as is the case with any kind of government action designed to directly boost the U.S. economy, the Romney-Ryan campaign disapproves.
QE stands for “quantitative easing,” two words that cause the minds of 99 percent of Americans to immediately shut down. But the basic concept at work is simple. It’s a way to inject money into the economy without running (much) risk of inflation. At its two-day meeting later this week, the Federal Reserve’s Open Market Committee will likely commit to buying around $50 billion worth of bonds a month — probably a mix of U.S. Treasuries and mortgage securities backed by Fannie Mae and Freddie Mac. In theory, this action will push interest rates lower across the economy.