In order to deal with the persisting economic malaise, the US Federal Reserve in September of this year announced that it would again utilize an unconventional expansionary monetary policy called quantitative easing (QE). Specifically, this involves buying, on a monthly basis, $40 billion a month of agency mortgage-backed securities and also to continue an extremely low-rates policy until well in 2015.

Under different circumstances, in order to lower short-term market rates, the central bank would probably have bought short-term government bonds. This won't work, however, when short-term interest rates are hovering around zero. In such a situation, the Federal Reserve turns to buying financial assets from commercial banks, with the hope of lowering long-term interest rates, thereby stimulating the economy.

QE3 can actually have negative consequences for the economy and for you. If you are a senior living on your savings or on a pension, lower interest rates could reduce your income and therefore your spending power. QE3 may also lead to higher inflation if the Central Bank overestimates the amount of easing and in the process of purchasing liquid assets creates too much money. Our economy would be flooded with weaker dollars, which means that it would be likely that most of us would have to work harder to maintain our current lifestyle, or even a less prosperous one.