tag:blogger.com,1999:blog-5713178645208582139.post3654596323499320768..comments2024-03-22T02:37:15.030-05:00Comments on Macro Musings Blog: QE Has Worked Before: My Reply to Paul KrugmanDavid Beckworthhttp://www.blogger.com/profile/04577612979801459194noreply@blogger.comBlogger22125tag:blogger.com,1999:blog-5713178645208582139.post-13543658791278818272010-11-01T14:36:04.700-05:002010-11-01T14:36:04.700-05:00This argument is based on unsound logic. The enti...This argument is based on unsound logic. The entire purpose behind QE is to increase lending. Mr. Bernanke has incorrectly diagnosed the current malaise has a banking crisis when it is in fact a household crisis. Mr. Bernanke believes he can make money so cheap that anyone will borrow. The problem is that we have a debt overhang and households are more eager to pay down debt than they are to MarkShttp://none.comnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-90866893448623855742010-11-01T10:21:57.948-05:002010-11-01T10:21:57.948-05:00Excuse my ignorance, but in all my reading I still...Excuse my ignorance, but in all my reading I still am confused about where the Fed gets what it needs to buy up securities. Does it sell assets from its portfolio, as some are saying it's just an asset swap of short term securities for long, or does it just credit the accounts of sellers? The latter would be the "creating ex nihilo" or printing money meme used by many. Or does it Frankie811https://www.blogger.com/profile/11190415876407351879noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-39711436951920983252010-11-01T08:55:24.699-05:002010-11-01T08:55:24.699-05:00Interesting article. Cant say I know never mind un...Interesting article. Cant say I know never mind understand all details of US QE1 structure/impact etc but from my understanding it certainly worked better than UK QE1. The Fed directly purchased MBS, which helped banks balance sheets, and even stimulated some lending (!). Also biought US Treasuries of course, which brought down borrowing costs for the government and many corporations. (UKQE1 by Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-19988570748732993962010-11-01T06:51:54.155-05:002010-11-01T06:51:54.155-05:00Anonymous:
Fair points on the unstable link betwe...Anonymous:<br /><br />Fair points on the unstable link between base, M2, and nominal income. But during much of QE1 inflation expectations were falling. With QE2 inflation expectations are already taking off (money supply measures M2 and MZM are growing already too). Also the fact that the Fed started paying interest on excess reserves indicates it was not interested in seeing big expansion of David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-6658118938605479052010-11-01T05:38:03.944-05:002010-11-01T05:38:03.944-05:00David, re your response to JzB re QE1/M2 etc....I ...David, re your response to JzB re QE1/M2 etc....I don't understand what the difference is. QE1 added reserves, just like QE2 is going to do. It doesn't really matter how they added. In fact, if I were to nitpick, I'd say credit easing was better because it actually took dodgy securities off the banks. Saving the system? That's great, but the end result was an increase in reserves Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-73572863423272582102010-10-31T23:10:20.052-05:002010-10-31T23:10:20.052-05:00Aren't the the Fed QE in the 1930s and the UK ...Aren't the the Fed QE in the 1930s and the UK QE today really a case of stimulus by devaluation? <br /><br />I imagine that is what Prof Krugman would say in reply, and that is why he is so concerned about China's currency intervention.<br /><br />What am I missing?Kienhttps://www.blogger.com/profile/15643929814291369340noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-42967608775085343382010-10-31T19:45:02.527-05:002010-10-31T19:45:02.527-05:00David -
Thanks for the clarification.
Cheers!
Jz...David -<br /><br />Thanks for the clarification.<br /><br />Cheers!<br />JzBJazzbumpahttps://www.blogger.com/profile/07337490817307473659noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-28049482951302394182010-10-31T14:14:30.686-05:002010-10-31T14:14:30.686-05:00Josh,
Good point. I hope Krugman takes notice.Josh,<br /><br />Good point. I hope Krugman takes notice.David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-58690245083334938412010-10-31T14:09:18.798-05:002010-10-31T14:09:18.798-05:00Lord:
I think the BOJ was very successful because...Lord:<br /><br />I think the BOJ was very successful because it was credible. Its goal, however, was a flat price level (i.e. 0% inflation). I am hoping Scott Sumner does a post on this again as a reply to Krugman.David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-17365054454305534242010-10-31T14:05:06.231-05:002010-10-31T14:05:06.231-05:00Jazzbumpa:
Comparing the increase in the monetary...Jazzbumpa:<br /><br />Comparing the increase in the monetary base to M2 during QE1 is misleading. The Fed was not directly trying to stabilize inflation expectations then. Rather it was first and foremost trying to save the financial system. Bernanke himself said we should not call it QE but CE (credit easing). The large increase in the monetary base was a byproduct of the Fed's efforts toDavid Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-6223879843658612272010-10-31T13:06:00.099-05:002010-10-31T13:06:00.099-05:00From what I understand about the gold exchange sta...From what I understand about the gold exchange standard, exiting it reshaped inflation expectations BECAUSE it enabled "meaningful increases in the monetary base."<br /><br />In other words, markets in 1930 saw the monetary base as "fettered" by gold and, as a result of expected gold hoarding, prices collapsed. In 1933, from one day to another, FDR broke this perception. <brDavid Pearsonnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-67529544204365504212010-10-31T12:43:13.227-05:002010-10-31T12:43:13.227-05:00Mr. K -
I doesn't look as if Congress has an...Mr. K -<br /> <br />I doesn't look as if Congress has any hands-on kind of control. They can amend the the Federal Reserve Act at any time.<br /><br />http://www.federalreserve.gov/generalinfo/faq/faqfrs.htm#8<br /><br />Cheers!<br />Mr JzBJazzbumpahttps://www.blogger.com/profile/07337490817307473659noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-12153770463224277552010-10-31T12:40:08.722-05:002010-10-31T12:40:08.722-05:00Why wasn't the BoJ successful? Lack of credib...Why wasn't the BoJ successful? Lack of credibility? The Fed may have plenty of credibility to halt inflation but none to increase it.Lordnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-8741459868366255342010-10-31T12:23:15.439-05:002010-10-31T12:23:15.439-05:00Question for all: Does the House Subcommittee over...Question for all: Does the House Subcommittee overseeing The Fed have the right to stop the printing presses ? I've read that the Repubs plan on installing none other than Ron Paul as head of this subcommittee, and he will without a doubt attempt to stop the printing..Mr. Kowalskihttps://www.blogger.com/profile/07899577790533734474noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-35817424712704825752010-10-31T10:51:31.708-05:002010-10-31T10:51:31.708-05:00Let's look at now. The gold standard shock of...Let's look at now. The gold standard shock of 75 years ago isn't especially relevant.<br /><br />Money supply (billions) increased from 800 to over 2000.<br /><br />http://research.stlouisfed.org/fred2/series/BASE<br /><br />M2 (billions)went from about 7800 to 8800. Less than dollar for dollar.<br /><br />http://research.stlouisfed.org/fred2/series/M2<br /><br />And the M1 multiplier Jazzbumpahttps://www.blogger.com/profile/07337490817307473659noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-90562574651652927282010-10-31T09:53:55.912-05:002010-10-31T09:53:55.912-05:00Didn't QE just work in the UK?
http://everyda...Didn't QE just work in the UK?<br /><br />http://everydayecon.wordpress.com/2010/10/27/monetary-policy-in-the-u-k/Joshhttp://www.everydayecon.comnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-18221006014657588272010-10-31T08:27:48.488-05:002010-10-31T08:27:48.488-05:00People are proposing fiscal Austerity which should...People are proposing fiscal Austerity which should be massively deflationary. Wouldn't this overwhelm any positive effect that QE2 would have on inflation? How can monetary policy raise inflation "expectations" when fiscal policy is creating deflation in reality?<br /><br />Can monetary policy be effective if fiscal policy is pulling in the wrong direction?<br /><br />-jonny bakhoAnonymousnoreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-42959354880318470642010-10-31T08:17:14.740-05:002010-10-31T08:17:14.740-05:00JDTapp:
Let me take a closer look at the piece, b...JDTapp:<br /><br />Let me take a closer look at the piece, but the excerpt below doesn't make a very coherent statement about NGDP targeting.<br /><br />By the way, there is a new article this week the National Review that comes out in favor of NGDP targeting. So there is a prominent conservative magazine that does support the idea. (Sorry, no link except for subscribers)David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-88177494860684400732010-10-31T08:12:38.631-05:002010-10-31T08:12:38.631-05:00Anonymous,
I am not sure what you getting at here...Anonymous,<br /><br />I am not sure what you getting at here, but if you mean that QE2 will mean the Fed buying long term treasuries and letting them sit in banks as excess reserves then you have a point. However, based on Fed officials talks and the last FOMC minutes, it is possible they may announce an explicit nominal target. Doing so would go a long ways in shoring up the velocity of money David Beckworthhttps://www.blogger.com/profile/04577612979801459194noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-32216227158403985772010-10-31T06:54:16.230-05:002010-10-31T06:54:16.230-05:00Dr. Beckworth, the conservative think tank Economi...Dr. Beckworth, the conservative think tank Economics21 (Keith Hennessey, Ed Lazear, etc.) <a href="http://www.economics21.org/commentary/feds-dangerous-game" rel="nofollow">has a post up critiquing QE, price level targeting and NGDP targeting</a> given current U.S. national income data. I was wondering if you could address it.<br /><br />They write:<br />Unmooring inflation expectations is a Justin D. Tapphttps://www.blogger.com/profile/12618278252714742391noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-41823807655248448792010-10-31T06:53:25.601-05:002010-10-31T06:53:25.601-05:00This comment has been removed by the author.Justin D. Tapphttps://www.blogger.com/profile/12618278252714742391noreply@blogger.comtag:blogger.com,1999:blog-5713178645208582139.post-65374026172495338352010-10-30T23:47:04.710-05:002010-10-30T23:47:04.710-05:00please correct me if I'm wrong, but what you&#...please correct me if I'm wrong, but what you're suggesting is quite unlike what the Fed is proposing to do, is it not? One actually sees money going into the economy, the other does not.Anonymousnoreply@blogger.com