Global Review

Currently, U.S. is still facing reduction of domestic demand, because of deleveraging (unwinding of debt) process and debt crisis; they have big deficit and 9% unemployment; their production has gone mostly in the emerging markets.  U.S. monetary and fiscal policies trying to achieve nominal and real depreciation of U.S. Dollar and other surplus countries - like China, currencies to appreciate -like Yuan.  This will trigger to save less and consume more because cheaper U.S. dollar and stronger China Yuan will increase purchasing power for Chinese consumers and make them consume more; U.S. export will increase and eventually global imbalances may balance.  Fed thinks with ought these QEs (stimulus packages more than trillion and + latest $600 trillion) they are facing deflation that decreases production, consumption and increases unemployment, which eventually leads to depression.   So they are saying their strategy is to depreciate U.S. Dollar or create some inflation and increase production, consumption, employment and exports. 

Stages from recession entry to economic growth:

First stage, shorter term effect was realized, that was interest rate decrease.  Second stage, it is now a transition period in the medium term that means prices of products will increase and inflation threat makes long term interest rates to increase.  The third stage, longer term expectation supposed to be (if exports support) bring competitiveness that is due to currency devaluation that should increase exports and revenue inflow that will increase real GDP and bring unemployment down - increased demand should strengthen currency.  But, if exports do not support third stage than…bigger problem can arise than just recession.