Quantitative Easing ... Explained?

[KLA2]

Is this funny? Serious? Both? (A little long – nearly seven minutes, but safe for work)

Created by some godless, socialist commies? Bible-thumping, capitalist tea-partiers?

Economists???

http://www.youtube.com/watch?v=PTUY16CkS-k

I hope Mactep is amused by this. I hope his response (if any) can be kept under a thousand words. :wink:

[Мастер]

Created by some godless, socialist commies? Bible-thumping, capitalist tea-partiers?

Doesn't conform to my stereotype of either, although if you force me to choose, I'd probably bet more on the latter rather than the former.

Economists???

Definitely not.

http://www.youtube.com/watch?v=PTUY16CkS-k

I hope Mactep is amused by this.

Started out pretty well, then a minute or so in, it all went to hell.

Re the goodness or badness of inflation or deflation - it is an ill wind that blows no one some good. If you are heavily in debt, inflation is your friend. The video does not mention wages going down in a deflation. If the price of your firm's product declines by 30%, and your salary is cut to match, and your mortgage debt remains at exactly the same level, how do you feel about that?

Re Bernanke and policy work - not really true, he was one of the governors of the Federal Reserve System, and then Chair of Bush's Council of Economic Advisors, before becoming Chairman of the Federal Reserve Board. He was also on his local school board once, for what that is worth. Whether he is the best qualified candidate is a matter of judgment (I think he was considered a dark horse candidate until Bush appointed him to the CEA), but I would not support his replacement by the plumber with the nice beard, at least not without some further information.

Re buying the securities from the Treasury Department - transferring money from the government's left pocket to its right pocket, and bonds from its right pocket to its left pocket, will have no effect on anything meaningful at all. To have a stimulative effect, either public spending or private spending (bit of an oversimplification there) has to be increased. The theory is supposed to be that this one will increase private spending; many are arguing it won't have that effect. Doing what the video author seems to want definitely won't. Maybe if you want to put on a show for political purposes, look what we're doing, without actually doing anything, you can do as the vidoe author seems to like.

I hope his response (if any) can be kept under a thousand words. :wink:

Didn't keep track. How did I do?

[KLA2]

About 319 words. Very concise. :wink:

Thanks for the analysis. 8)

To a layman, half-truths can sound very convincing.

[Мастер]

Here is the Wikipedia page on quantitative easing.

Generally speaking, government policies to stimulate the economy involve direct government spending, or increasing the money supply in order to increase private-sector spending. Quantitative easing falls into the second category, and (as the Wikipedia page says) involves an attempt to increase the money supply when other methods are ineffective, typically because short-term interest rates are close to zero and can't be lowered much more.

I like the Wikipedia statement of the risks of quantitative easing:

Risks include the policy being more effective than intended or the risk of not being effective enough

Yep, those would be the risks :P

Here is a relatively positive review of QE2.

I'm having a hard time Googling up a good criticism of QE2.

[tubeswell]

'quantitative easing' brings to mind that other economist contrivance, 'satisficing' (don't know why - it just does), except that 'quantitative easing' probably more brings to mind a feeling of 'laxative indulgence' - (which is probably what the global economy needs when things aren't moving freely) - which depending on the amount of laxative prescribed could be very satisficing, or not.

Actually 'quantitative easing' reeks of 'bail-out' does it not? Why does this make me (as a taxpayer) mad, when really I should be left feeling satisficed after using laxatives?

[Enzo]

SOmething about the fiber of our economy. Or fibre to those that need that.

[rmercure]

"Quantative Easing" is just like it sound - a method of relieving severe constipation with the least pain and blood involved - but that doesn't mean the system's isn't still full of it.

While Harry Truman is just about my least favorite 20th century politician (close tie with Ronnie Ratzass) he did come up a good quip every now and the. My favorite: "If you took every economist in the USA and laid them end to end they wouldn't reach a conclusion."

It's all still redistribution of resources from the pockets of the least affluent to those who buy a member of congress of two every X-mas - maybe give to worst one to another golf course friend.

R

[tubeswell]

"If you took every economist in the USA and laid them end to end they wouldn't reach a conclusion."

ha ha LoL :D

[KLA2]

My favorite: "If you took every economist in the USA and laid them end to end they wouldn't reach a conclusion."

Heh. Heard that one before. Never stops being funny (I hesitate to say true ...)

Got to be fair. It is similar to weather predictions. There will be rain, cold, heat, hurricanes, tornados, earthquakes, floods, asteroid impacts ... specific dates and locations, hard to be specific. :wink:

Hope you and Mactep have some polite, stimulating conversations. Most of the rest of us will sit by on the sidelines and wonder what you are talking about.