|Published:||Sep 14, 2012 5:28 PM EDT|
|Updated:||Sep 14, 2012 6:03 PM EDT|
FORT MYERS, Fla. - It's your money and the Federal Reserve will pump billions of it to once again try to stimulate the economy.
But what exactly is QE3? And Will it work?
Let's first start with the title, which sounds like a random grouping of letters and numbers. QE3 stands for Quantitative Easing 3, because it's the third time the Fed has tried this.
Essentially the Fed will print more money to put into the economy. Basically, policy makers will buy $40 billion in mortgage-backed securities each month. This pumps money into the U.S. economy and reduces long-term interest rates further. When long-term interest rates go down, investors have more incentive to spend their money now.
The Fed didn't say when it would stop, so the money train will keep on going until the economy gets better.
Wall Street took notice immediately, the S & P 500 closed at its highest level since December of 2007 after the announcement.
The Fed has tried this twice, the first time in November of 2008. Many experts argue that kept the U.S. from going into a depression. Officials started it again in August of 2010, and there's a lot of debate about whether it worked that time.
The biggest difference between the three is that QE3 does not have an end date. So the Fed will continue to create money and pump it into the economy until officials feel it has improved.