"Quantitative Easing Is Not Working"

Discussion in 'Economics' started by Daal, May 29, 2009.

  1. Daal


    I hear pundits saying that if treasuries are tanking then QE is not working. The idea behind QE is to create inflation and prevent deflation, look at the dollar, TIPS and commodities, quantitative easing IS working, the more people think the government will hyperinflate the more QE will be working, thats the whole idea behind it, if deflation were to take place all bernanke would have to say would be 'we have no exit strategy', that should roil markets and get inflation expectations going pretty nicely.

    Whats might not be working as well is the propping up of housing through lower mortgage rates, but only recently they rose and they would probably be much higher without the buying up of GSE stuff
  2. Pascal


    With a huge burst of monetary stimulus, real interest rates are falling if they are rising slower than the rate of money printing. So, in a way it is working. The real 30 year fixed could be at around 4%, if the money gun is shooting out 2 or 3 percent inflation.
  3. Of course QE is working... oil is gonna break $80 next week if this keeps up.
  4. If the idea was to 'stimulate' the economy how can this be achieved with allowing the blood on which the economy runs to spike again.

    Imagine 20$ oil a barrel. Wouldnt that have stimulated the economy?

    Thanks for the insights of the op btw.

    You get the 'it's not working it's not working!' alot but perhaps they should look a bit closer on the goal of QE.
  5. The higher disposable income argument is of course stimulative - that is fiscal stimulus for you. On the same token, monetary stimulus discourages hoarding of cash and increases money velocity, increasing output. As well, it can be stimulative for exporters. So, it can be stimulative to aggregate demand.

    I agree with the cheap energy argument. My proposal is a combination of money printing and flooding the market with energy supply (via breeder nuke plants and electric car infrastructure mandates), so that the consumer gets higher disposable income in real terms and velocity picks up. Of course, then that leads to new bubbles... but at least employment is up and real wealth increases.
  6. Eight


    The Mojave Desert's 25,000 square miles can supply enough solar energy to run every car, house, and factory from Canada to Mexico. The technology is entirely here, million volt electric lines, giant liquid based storage batteries, sterling engines and computer controlled parabolic reflectors, etc.... We only have to screw around with oil and ethanol and all that ridiculous stuff because of politics. That would be the low cost energy solution that would give the economy a shot in the arm both in the building of the infrastructure and in long term energy prices...

    Businesses and this Kindergarten level political system we have can't be trusted with nuclear power. France has lots of cheap energy via nuclear but they pipe the nuclear waste straight into the ocean believe it or not...