Quantitative easing (QE) policies like QE2 impact the global economy in several ways. QE2 will likely weaken the US dollar over the long term due to increased money supply. A weaker dollar raises commodity prices like oil and boosts carry trade flows. It also puts pressure on sovereign debt and impacts China's foreign exchange reserves by devaluing the dollar assets they hold. Emerging markets face appreciation of their currencies which impacts exports while Europe sees weaker recovery due to less competitive exports to the US.

1. QUANTITATIVE EASING- II AND ITS IMPACT

2. Impact on the us economy AGENDA FOR THE PRESENTATON The phenomenon of Quantitative easing Long term impact on dollar Impact on commodities & oil prices Impact on Sovereign debt of the developed world Impact on India and China A B C D E F

3. Quantitative easing-II YOU & I BANK-I CENTRAL BANK BANK-II FIRMS G.D.P SUPPY VELOCITY

5. Cant Force to spend more

6. Bonds ??

7. Yield Vs Price

9. LONG TERM EFFECTS ON DOLLAR

10. LONG TERM EFFECTS ON THE DOLLAR

11. IMPLICATIONS ON US TRADE DEFICIT

12. Expected effect in the domestic US markets.

13. IMPACT ON THE US ECONOMY

14. US GETTING WEAKER OR STRONGER? In view of the current situation the financial position of U.S. is set to weaken. Macro Economic indicators still weak. Lack of confidence in the recovery of the economy. Dollar index reached the lowest point in Q4 2010. Diversification out of the Dollar. Threatfrom Chinese economy.

15. US GETTING WEAKER OR STRONGER? Rush to dump the U.S dollar and to accumulate gold and other more stable currencies China has already started bilateral trade in Yuan with a number of SE Asian and African countries OPEC may also shift to more stable currencies .

16. WHAT IS CARRY TRADE ? With a low interest rate Investors would borrow from the US Funds will flow from US to Brazil , invested in to the high yield bonds. US carry trade will take place.

18. Expected to remain low for a while now.

19. U.S. carry trade set to increase.

22. Effect on international commodity prices Commodities are $ denominated thus along with $ the commodity prices are likely to become cheaper in currencies that revalue them. This is likely to make countries like China hoard metal like copper to boost future growth thus increasing its demand. This would lead to speculative buying of commodities Furthermore, with low interest rates and high inflation people like to hedgewith commodities. This would lead to higher commodities prices

23. Copper is the driver of growth. Low interest rates make bank deposits useless specially if inflation is higher than the rate. This leads to speculative buying of metals. Besides the devaluation of the $ makes it cheap for China to hoard the metal for its industrial ambitions. One should go long on copper. What position Long or Short would you take on Copper?

24. “JP Morgan revealed as mystery trader that bought £1bn-worth of copper on LME”- The Telegraph; 4th Dec 2010 Bought 350,000 tonnes in reserves This pushed up the price for copper to $8,700, its highest level since the financial crisis in October 2008. A recent example …

25. Effect on GOLD ? Gold is a hedge against inflation and uncertainty. With low interest rates; slow and uncertain recovery of the US, the gold prices are likely to hold strong.

27. All major economies are shifting to gold

28. Countries are diversifying their Forex reserves

29. US holds 8,000 tons of gold, the highest in the world

30. China's gold holdings surged to 1,054 tons in 2009 from 454 tons in 2003. The nation is the world's fifth-largest gold holder.Cont…

32. EFFECT ON OIL PRICES EMERGING ECONOMIES

34. Rise in crude prices has an inflationary effect.

36. IMPACT ON SOVEREIGN DEBT

37. Sovereign Debt of Countries

39. Devaluation of USD Repayment of debt becomes expensive OUTSTANDING INTERNATIONAL DEBT

41. Demand for treasury bills likely to go up

43. IMPACT ON CHINA

44. Impact on Chinese Economy? China artificially maintains a devalued Yuan. There is a limit to the amount of USD which a central bank can hoard. Excessive Yuan in the market will lead to inflation. Thus it is inevitable that China revalues.

45. impact on CHINA’s Foreign exchange reserves? Due to artificial valuation large assets have been built up in china. It is estimated that about 70 % of China's foreign exchange reserves are invested in dollar assets. A stronger Yuan would intensify this year, attracting "cross-border arbitrage" funds, because of the country's relatively high interest rates

46. impact on CHINA’s Foreign exchange reserves? Cont.. Proceeds from exports would also rise as global recovery generated demand for Chinese goods With foreign direct investment expected to increase steadily, China will be facing greater pressures from the rising amount of foreign exchange inflows Any sudden revaluation will prompt rapid sale and may cause a bubble effect.

48. Purchases could push up gold prices sharply. Also, the average long-term returns on investment in gold are low.