What is Quantitative Easing, and why should you care when it ends?

Quantitative Easing is this: The US Treasury issues DEBT to raise money to pay its DEBT. It gives this DEBT to the BANKS to sell. The BANKS sell the DEBT to the FEDERAL RESERVE BANK. The FED gives DOLLARS to the BANKS. The BANKS buy RISK ASSETS like STOCKS and MORTGAGES.

This accomplishes the following:
1) It keeps the cost of DEBT: INTEREST RATES low.
2) It keeps a liquid market for our DEBT so we can keep borrowing to finance our GOVERNMENT.
3) It props up RISK MARKETS like the STOCK MARKET and the Secondary Market for RISKY DEBT like Mortgages.

The only casualty is the value of the DOLLAR which declines because more and more are created to buy the DEBT.

Consequently all real goods get more and more expensive.

Here then is the FED's DILLEMA.

CHOICE ONE: END QUANTITATIVE EASING: Then even if we were to balance the budget this year, we still need to issue 14 Trillion dollars of new debt. If the Fed doesn't buy this debt, Interest Rates will go sky high - in order to attract Real Buyers. And the cost of Financing our 100 Trillion Dollar Real Debt becomes impossible. Meanwhile the Banks have no more money to prop up the Stock Market. In fact, they will be functionally bankrupt. And Trillions in wealth will be destroyed as the stock market and risky debt markets crash. We have a real depression.

CHOICE TWO: Keep printing money to buy our own debt, and prop up the risk markets. Meanwhile destroying the value of the dollar and sending commodity prices sky high.

That's it folks. There are no other choices. Sorry.

Oh, yeah, I forgot, choice 3: cut funding to PBS and make sure those darned public school teachers don't keep sucking us dry. That will fix everything. Oh, and kill Osama Bin Laden. And find Obama's birth certificate (I mean the real one that the mountain trolls stole and are hiding in the dragon's lair). And spend lots of time arguing about whether the earth is getting colder or warmer. And call everyone who disagrees with you a Nazi. And blame the Muslims for everything. Or blame Israel for everything. Or the Jews in general, you know they're behind this somehow. Or blame the Mexicans. Or blame the French, after all, they're all socialist rapists. See, I guess I was wrong, there's lots of things we can do.