I have not had time to really think about the Fed's announcement yesterday or digest the various reactions. My stance on this has always been that this is a good idea, but don't expect miracles, and strong fiscal policy is where we should expect to get the most traction when we're so far below full employment. But then again, I often feel out of my depths in monetary discussions.
There's been lots of good blog posts and thinking on this - please feel free to use the comment section to share those as well as your own thoughts. I'm interested in hearing them even though I don't really have any of my own.
Thursday, November 4, 2010
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QEII is a good idea because, regardless of what else is occurring in the economy, a constant growth path for nominal spending is the least bad goal of monetary policy. The Fed should announce and explicit level target for some measure of nominal spending, and force nominal it closer to its pre-recession trajectory. QEII is not going to achieve either of these ends, but it is a modest improvement nonetheless.
ReplyDeleteFiscal policy is so redundant it shouldn't even be on the table, in my opinion. Everything fiscal policy might do to achieve the ends described above, monetary policy can do ten times better. (I don't believe in liquidity traps.)
Wow, this really is an open thread. There is nobody else here.
ReplyDeleteThere's really not much to say. A buncha money was 'printed', so we can expect inflation. Hopefully the economy will recover and the inflation won't be too high.
ReplyDeleteOr nothing could happen and the Fed really is pushing on a string.
Its too early to tell now.