The Fed’s more than $2 trillion of quantitative easing in the United States has succeeded in lowering long-term interest rates here at no cost to the taxpayer, and has had no measurable effect on inflation. The Fed can embark on a similar program of buying sovereign European bonds, which would also be costless to U.S. taxpayers and merely result in the accumulation by the Fed of foreign reserve holdings. It would be much smaller in size than the domestic quantitative easing that the Fed has carried out to date, and even less likely to impact inflation. On a per dollar basis, it is difficult to envision anything the Fed could do that would have a larger impact on growth and employment in the United States.
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