The Bond market is a very important component of a well functioning economy. We

Question

The Bond market is a very important component of a well functioning economy. We discussed in the class that Treasury Bonds are said to have low, or no default risk. In other words, they are backed by the United States.

The Federal Reserve has been doing a technique called Quantitative Easing for a number of years. Please discuss what the concept of QE is and what the possible negative outcomes could be if the FED does not wind-out of it correctly? What are the possbile outcomes in the Bond markets and with interest rates if it goes wrong?

Explanation / Answer

Since the global financial crisis, both the Bank of England and the Federal Reserve have used the policy of quantitative easing (QE) to try to revive consumer spending and economic growth.

In the UK, the Bank of England began its "asset purchases" in January 2009.

The Bank has so far committed a total of

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