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Source link: http://archive.mises.org/16613/a-600-billion-flop/

A $600 Billion Flop

April 24, 2011 by

It’s bad news for the Fed when even the New York Times writes about its policy flops, and this story also shows that there big shots even within the Fed are bailing on QE2, claiming that they were against it from the outset. There is also an underlying current to the story that whatever recovery people think they see is illusory.


Matthew Swaringen April 24, 2011 at 2:14 pm

There is another great story on the page as well. It almost sounds like this liberal is reading history or something….

s burgess April 24, 2011 at 4:25 pm

Matthew Swaringen..yea i think he might of read some history.was a good a overview of high speed rail and the hazards of subsidies.

Roger April 24, 2011 at 9:15 pm

Well, at least we know where to pin the blame — Bernanke and the Fed — since there are no other government entities or politicians even mentioned in this article. Unless there are some people, referred to here as “some economists,” who have some influence on government policy who work on Capitol Hill or in the White House.

Daniel April 24, 2011 at 9:43 pm

Or the NYT

Iain April 24, 2011 at 11:48 pm

Isn’t it just saying they didn’t go big enough?

nate-m April 25, 2011 at 7:39 am


If borrowing and spending money doesn’t get you out of a debt crisis it’s only because you didn’t borrow and spend enough.

It’s logic!

Shay April 26, 2011 at 6:04 am

If only there were more homeopaths in government. Then they’d believe that doing less of a bad thing (quantitative easing) would have more of a beneficial effect.

Dick Fox April 25, 2011 at 6:41 am

Excerpt from the NYTimes article:

“It’s good for stopping the fall, but for actually turning things around and driving the recovery, I just don’t think monetary policy has that power,” said Mark Thoma, a professor of economics at the University of Oregon, referring specifically to the bond-buying program.

Mr. Bernanke and his supporters say that the purchases have improved economic conditions, all but erasing fears of deflation, a pattern of falling prices that can delay purchases and stall growth. Inflation, which is beneficial in moderation, has climbed closer to healthy levels since the Fed started buying bonds.

I just can’t believe how big the fantasy world is that these people live in. Mark Thoma always molds facts until they fit into a Keynesian box and usually that means he makes assertions about how much worse it would have been without the Keynesian actions. FED actions are “good for stopping the fall?” Give me a break. An assertion with no proof. How about FED actions creating the fall?

The “Mr. Bernanke and his supporters” say they have removed fears of deflation by pumping up bank reserves. There was not deflation only contraction in the economy. Then he has the nerve to take credit for the small employment that came from the extension of the Bush tax cuts.

Did I say fantasy world? I should have said delusion.

Ohhh Henry April 25, 2011 at 10:35 am

Inflation, which is beneficial in moderation

He means, healthy for banks and government. Which in his mind probably means that it is good for everyone else.This is the typical public pronouncement of a Keynesian – (a) they never mention Keynes, (b) they never back up their claims with either the arguments of Keynes in favor of inflation or with their own, original arguments or with the arguments of other post-Keynesians.

The arguments of Keynes, as I understand them, were notably slim – inflation is good because it deceives the unions into accepting lower real wages, and also because it discourages “hoarding” (i.e. saving) money and encourages consumption. It is no wonder that these arguments in favor of deception and thriftlessness are never brought forward.

As for the post-Keynesian arguments in favor of inflation, as I understand it they are mostly obtuse mathematical theories about the alleged “velocity” of money. These arguments would also fall flat with the public since they are unrelated to any real, observable and testable phenomena. Imagine a post-Keynesian trying to explain the velocity of money to an uneducated layman – “So you see, if Smith the central banker gives Crusoe 1 million more banana leaves with “IOU” written on them, it is then easy for Crusoe to persuade Friday to continue to fish for him every day. Crusoe can continue making luxurious additions to his hut instead of going back to work picking coconuts. He is allowed to pay off his nominal debt to Friday in devalued green bits of leaves instead of having to pay him in valuable coconuts, and everyone on the island lives happily ever after.”

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