Posts filed under “Federal Reserve”
“The weak recovery is proof that the Federal Reserve’s program of quantitative easement does not work.”
You do not understand the Counter-Factual.
That is the only conclusion I can draw from what the very common criticism of the Federal Reserve policies of ZIRP and QE (above), and its inherent analytical error.
The most common version goes something like this: If you do X, and there is no measurable change subsequently, X is therefore ineffective.
The problem with this “non-result result” is what would have occurred otherwise. Might “no change” be an improvement from what otherwise would have happened? Flat, last I checked is better than freefall.
If you are testing a new medication to reduce tumors, you want to see what happened to the group that did not get the tested therapy. Perhaps the control group saw tumors grew; maybe they were metastasizing throughout the body. Hence, a result where there is no increase in tumor mass or spreading would be considered a very positive outcome.
We run into the same issue with QE. In the absence of a functional congress or traditional post-recession Keynesian stimulus, the Fed is the only fgame in town. Neither you nor I truly know what the impact of QE has been.
If They Will Lend, Someone Will Spend (on Something) Paul Kasriel March 17, 2014 Upon awakening from my winter hibernation way up here in beautiful northeastern Wisconsin, I have noticed that bank asset managers have been anything but hibernating. Rather, they have been quite busy expanding their loans and securities. As shown in…Read More
Private Credit and Public Debt in Financial Crises Òscar Jordà, Moritz Schularick, and Alan M. Taylor FRBSF Economic Letter 2014-07 March 10, 2014 Recovery from a recession triggered by a financial crisis is greatly influenced by the government’s fiscal position. A financial crisis puts considerable stress on the government’s budget, sometimes triggering attacks…Read More
How Unconventional Are Large-Scale Asset Purchases? Carlo Rosa and Andrea Tambalotti Liberty Street Economics, March 03, 2014 The large-scale asset purchases (LSAPs) undertaken by the Fed starting in late November 2008 are widely considered to be a form of “unconventional” monetary policy. Although these interventions are certainly unprecedented, this post shows that their…Read More
Source: Elliot-today Earlier this week, we discussed the amount of laughter in FOMC meetings as a sign that the Fed was not fully cognizant of the coming financial storm. Today’s chart adds another component to this, overlaying Fed laughs with Case Shiller residential real estate price index, via Elliot-today. Perhaps the best way…Read More
Source: Bianco Research This month, 1,865 pages of FOMC transcripts from 2008 were released to the public. Bloomberg studied the transcripts, finding on average about 25 references to laughter per meeting of the Federal Open Market Committee. This was almost half of the 45 giggles per FOMC meeting in 2007. Continues here