I thought I should comment on the Bernanke Quantitative Easing. As I am a macro economist I thought you might like to know what other macro economists think of his decision. First of all Quantitative Easing is not the last option he could do other things, quite a lot of them. I am writing a paper about this and will post it if it is published. The thing I don't understand is why he thinks it will work. The market is constrained there is no reason why it should work. The long term demand curve is likely to be in decline and the ability to enable employment is not there. To help the situation he would have to introduce legislative changes to create employment opportunities. Unemployment is actually opportunity especially if it is skilled. The key to reducing it is enabling the market to be cost effective enough to make employment attractive to employers. Marketing and sales is only one aspect to employment. The concept that you need to entice demand to need employees is true however there is another dimension. The cost to the employer of employees. There may be businesses that want more staff but cannot afford them this is something I found working previously in insolvency that the demand was there but legislative and cost limitations prevent growth both of employment and enabling service. By reducing the legislative requirements of employers and the government enforced cost of staff the labour market will become more attractive. This works for both internal and external markets. If you are an investor or trying to borrow money from someone justification of return is required if the running or operating costs are low you can do this more easily and capital investment will be easier to gain. The concept of demand has been one sided purely consumer consumption or government procurement. They have neglected capital investment and by that I mean the investment in new business creates demand for production in capital goods, tools, factories and workers. This is the key to recovery the ability enable the means of production. By cutting the costs of starting new businesses the employment market will pick up. Purely putting money into failing businesses will do nothing but provide false hope. In my opinion Bernanke makes a foul of himself he is not acknowledging an important aspect of aggregate demand and the full tools that make it possible to recover. Has he never heard of capital investment (not stimulus, this is different). Any thoughts.
I am just asking as you mentioned... "I thought I should comment on the Bernanke Quantitative Easing. As I am a macro economist I thought you might like to know what other macro economists think of his decision"
Yes indeed. B is no fool, nor are the people around him. Therefore we are compelled to assume his agenda is somewhat different to the manner in which you view and describe the macros. The question to ask is "what is B up to" What is it that he can see, and more importantly, what parameters has he had set for him by his Superiors. It is all well and good to confine your thinking to a US only problem, but B represents the people that think globally and it is probably prudent to follow along behind these guys and try to figure out just what they are up to and where they are taking this thing.
To help the situation he would have to introduce legislative changes to create employment opportunities. Morgan, your post contains the questions and the answers and you're probably correct on both counts. Bernanke cannot introduce legislative changes to create employment. Imo, no one would ask him, no one would listen to him, that's not his job. The people with the answers are not the people who are able to effect change. Creating a job via a tax incentive would most likely be seen as corporate welfare, upset parity with unions and on and on. Probably all the good ideas wouldn't withstand a court challenge. Sad to say, Bin Laden on 911 probably was the last momumental job creation in this country, which was addtional hiring of security.
There is no professional qualification to become a macro economist. A PHD is not necessarily a qualifying requirement. Different macro economists do different things some are accountants that work in economics, some are statisticians or mathematicians then they apply what they know to the subject. The macro economists who have pure PHD's in economics are usually not that revered, most will have a qualification in another subject like banking or accounting etc. I have an accounting back ground but I can do other things like computer programming, banking, insolvency etc. I invent aggregate demand controls, taxation systems, banking systems. Therefore I am a macro economist.
I think that my real point in this is that aggregate demand is C + I + G + E. Investment is still an opportunity to control aggregate demand without resorting to QE. Why has no one else appreciated this.
There's no need to assume anything you just assumed. The bolded part is particularly off-the-wall. Bernanke is following the global crowd; ergo, he does QE2? What? If anything, he's setting the stage for trade wars and currency interventions. Look at China re: rare earth metals and Brazil's controls as early signs. As one analyst put it, Bernanke is giving other countries two choices: devalue or kill exports. What a swell guy.