tag:blogger.com,1999:blog-5713178645208582139.post5923046429448926372..comments2024-03-22T02:37:15.030-05:00Comments on Macro Musings Blog: QE Has Worked Before and It is Not Just About Lowering Interest RatesDavid Beckworthhttp://www.blogger.com/profile/04577612979801459194noreply@blogger.comBlogger4125tag:blogger.com,1999:blog-5713178645208582139.post-49161516952586575172010-12-02T01:40:01.698-06:002010-12-02T01:40:01.698-06:00I should have said in addition, that as an admirer...I should have said in addition, that as an admirer of Abba Lerner and Modern Monetary Theory, I’d be all in favour of repeating the 1933 policy, except that with every country now being off the gold standard, gold is now irrelevant. That is, the government / central bank machine can (and in a recession should) create money ex nihilo and spend it on the normal items that governments fund (or they Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-39627163628985740612010-12-02T01:28:43.784-06:002010-12-02T01:28:43.784-06:00The so called QE that took place in 1933, if Paul ...The so called QE that took place in 1933, if Paul Kasriel’s description is accurate, bears little resemblance to the QE taking place in 2010. The former consisted of raising the value of gold in dollar terms, which enabled the Treasury to create dollars out of thin air. <br /><br />The first crucial difference between the two is that the 1933 episode increased the private sector’s net financial Ralph Musgravehttps://www.blogger.com/profile/09443857766263185665noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-61897901641407267482010-12-01T08:33:00.514-06:002010-12-01T08:33:00.514-06:00Lee, you are correct. The real reason the Fed is g...Lee, you are correct. The real reason the Fed is going after long-term securities is because short-term securities have become near perfect substitutes for the monetary base. By purchasing long-term securities, portfolios will be out of balance and readjusting of it ultimately lead to more spending. All asset prices and yields will be affected to some degree.David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-79598951605471347012010-12-01T00:15:38.130-06:002010-12-01T00:15:38.130-06:00Moreover, interest rates on long term government b...Moreover, interest rates on long term government bonds are influenced by all kinds of other factors than Fed purchases, such as confidence in the U.S. government, general willingness to save, supply of close substitutes, etc. Although these aren't likely to change much over the next couple of years, they help to remind us why the Fed has no business trying to determine particular interest Lee Kellynoreply@blogger.com