Consider This
While most people probably don't pay much attention to the Fed's nightly "repos," the fact is that those actions have a huge impact on the finances of investors and companies.
And there are definitely right and wrong ways to add money to an economy. The wrong way often includes printing massive amounts of money that can lead to hyperinflation. Many countries have fallen victim to bad monetary policy as a consequence of politics or unrealistic borrowing. Such has been the case most recently with Zimbabwe, a country whose annual inflation rate is climbing beyond 3,700% (see
England's Times Online).
By comparison, U.S. inflation for 2006 was around 2.5% (see
CIA data). Zimbabwe's practice of printing money as a means of alleviating debts has proved to be a big contributor to its monster inflation rate.
By using tactics such as open market operations and interest rate manipulation, central banks (including the U.S. Federal Reserve) work hard to make sure that the country's economy operates in a healthy, sustainable manner.
Jonas Elmerraji
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