These effects can be quantified through simulations of the Board’s FRB/US model. In the simulation I described earlier, a hypothetical program involving $ billion of asset purchases would reduce the ratio of federal debt to gross domestic product (GDP) by about 1.5 percentage points by late 2018. The lower debt-to-GDP ratio mainly reflects stronger tax revenue as a result of morerobust economic activity.
1.5 trillion euros are traded daily on the world’s foreign exchange markets. And it is used daily by the 330 million citizens of the euro area. A currency that plays a central role in the lives of so many people has to be managed with effective decision-making. The second path, designing a new architecture, is therefore the only way forward.