

St. Louis Fed official: No evidence QE boosted economy - adventured
http://www.cnbc.com/2015/08/18/st-louis-fed-official-no-evidence-qe-boosted-economy.html

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Animats
But it sure helped out banks, who get to borrow from the Fed at near zero
rates and lend at much higher rates.

The US tends to inject Government money into the economy through banks. In
comparison, Japan tends to inject Government money through infrastructure
projects. Some of the infrastructure projects are expensive for what they
accomplish, but at least they're real things.

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animefan
Open market operations can't really be characterized as lending to banks.
Instead, the Fed buys various kinds of debt, especially US govt bonds, thus
injecting money into the economy. The fed funds rate is really the rate at
which banks lend to each other. Banks are privileged in that they have a
special legal mandate to act as banks, but they are not privileged in terms of
access to credit (they can borrow at the "discount window" but this is less
important than the Fed's open market operations).

But more importantly, QE is more like injecting money into "real things" since
it is buying corporate debt that presumably funds real projects. So the
(alleged) failure of QE is not very good evidence for your claim that standard
monetary policy is bad.

EDIT: and they main reason I and most economists prefer US style monetary
policy is that it's very neutral: you have a lever, and that lever is how much
bonds you buy. You can choose various flavors of bonds, and various
maturities, but they are all fundamentally the same. In contrast, the
government directly funding real projects lends itself to corruption and
favoritism.

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pjmorris
> You can choose various flavors of bonds, and various maturities, but they
> are all fundamentally the same.

It appears to me that you've just equated a US Treasury bond with a private
label subprime RMBS. Is that a fair assessment? If so, how strongly do you
feel about that equivalence? I see the private label RMBS's as less of a 'real
thing'.

~~~
animefan
In the context of that sentence, I was referring to the bonds bought by open
market operations, which are primarily US government bonds and would not
include private label subprime RMBSs.

The kind of close-to-risk-free bonds bought in open market operations are all
fundamentally the same because they simply move money from one point in time
to another.

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pdkl95
To paraphrase Mark Blyth (Prof. Econ. at Brown), QE is the absolute worst way
to deal with our banking mess, _except doing nothing_. It kept the US from
crashing into the mess that Europe is in. That was probably good, but it was
effectively a class-specific put option.

"Not crashing" does not necessarily mean "positive boost".

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afarrell
This sounds like it leads into an argument for trying to find ways to broadly
increase wages in order to deliberately spur inflation.

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animefan
One of the main mechanisms by which inflation stimulates the economy, is that
it lowers wages (because of sticky wages) hence decreasing unemployment. So
intentionally raising wages as a form of stimulus seems counterproductive.
Could you explain your argument more?

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badsock
One of the ideas floating around is that the economy is currently limited on
the demand side, and that increased wages will result in more disposable
income and higher consumption.

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animefan
Increasing _wages_ will make employers less inclined to hire people, and thus
potentially less total disposable income. Giving ordinary people more money
directly seems like a more reasonable sort of stimulus. Where are these ideas
floating around? The idea of sticky wages dates back to Keynes.

~~~
badsock
I tend to side with the argument that employers ultimately hire not because
people are cheap, but because they need them to meet demand. If there's no
demand, there's no wage low enough to justify a hire. I don't want to speak
for Thomas Piketty, but my reading of his data is that generally economic
growth is the product of higher wages, not the other way around.

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JoeAltmaier
Hard to judge what would have happened had the policy _not_ been in effect.
Only 1 sample in the experiment.

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sjg007
Banks are broken, they will only issue mortgages, high interest credit cards
and charge fees.

~~~
adventured
They're not issuing nearly as many mortgages.

Non bank mortgage lending is nearly 40% of the market at present, up from 13%
in 2012.

[http://www.cnbc.com/2015/04/01/guess-whos-issuing-slews-
of-m...](http://www.cnbc.com/2015/04/01/guess-whos-issuing-slews-of-mortgages-
not-your-bank.html)

