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Discussion: (9 comments)

  1. Correct.
    Will’s view of the Fed bond-buying program as a failure is based on the stated purpose of the program. The program is quite successful in achieving its true goal: positive cash flow for Wall Street.

  2. What I learned today:

    1) There is absolutely no differences at all between the U.S. economy and the economies in Europe besides central banking policy. No other variables at all!

    2) Critics of money printing think central banks should work to ensure prices remain the same no matter what.

    3) There is a specific amount of money the market demands and the Fed is capable of knowing what this number is.

    4) It is somehow possible to know what prices would be absent central banking interventions (apparently technological innovation does not, in fact, reduce prices).

    5) George Will is “completely unaware” that there is a small school of thought called “market monetarism.”

    6) Mr. Pethokoukis writes for the conservative publication, National Review.

  3. Benjamin Cole

    Excellent blogging.
    BTW, the Bank of Japan proved that merely low interest rates still can be “tight money”. The yen soared after 1992. The Fed’s bond buying program is still not “easy money”—that is why we have seen record low inflation.
    The Fed needs to buy even more bonds…it is being artificially tight…

  4. Dwight Monson

    I’ve been hoping someone would communicate this to George Will since I started reading Scott Sumner about two years ago. Thank you!

  5. Thanks. Someone needed to write this. The Right just doesn’t understand market monetarism, or even monetarism. Too busy reading Rothbard to read Friedman.

  6. Bill Woolsey

    I think the Fed is guilty of “increasingly allocating credit.” In particular, the shift into mortgage backed securities was rationalized as an effort to improve the housing market. Combined with the policy of paying interest on reserves, this is an effort to allocate credit and the composition of spending on output, rather than aggregate spending on output while allowing the market to allocate credit, spending, and resources.

  7. bastiches

    If wages and prices controls are antithetical to the conservative viewpoint, why would government control over interest rates be rational?

    We understand that no centralized government can interfere with pricing without incurring inefficiencies and unintended consequences.

    How are interest rates, the central figure of any developed economy, any less susceptible to the problems of interfering with market pricing? How are they less likely to run headlong into knowledge deficits and political interference?

  8. Things I still don’t know.

    1. Why your so upset with Mr. Will for pointing out that the Fed is a creature of Congress.

    2. “The Fed isn’t allocating “credit, wealth, and opportunity,” (it just feels that way because the wealthiest 0.5% were made whole against losses incurred during said meltdown) it’s merely trying to accommodate excess demand for liquid assets, bonds, and cash in the aftermath of a series of economic shocks: the recession, financial meltdown, and euro-zone crisis” – You don’t mention that the Fed printed money for the Treasury to spend on Obama’s expansion of government? Why? You included the euro-zone – is that a Fed responsibility? Which part of the dual mandate?

    3. I didn’t know about the new schools of monetarism, and credit allocation spending, and root canal monetary policy – whatever that is. I still don’t.

    4. When the US government will start to pay back the $17 trillion it owes. I must admit that you have confirmed my suspicions, along with the non-taper, that NZIR are here to stay, as a 1% increase is $0.17 Trillion in interest. But this is not root-canal, this is burn the children’s future opportunity monetary policy, by making them debt surfs.

    5. What is the definition of too big to fail? When will bankruptcy be thought of as a natural part of the business cycle again? Maybe you have a new school to suggest on that one.

    6. How you can have a President who doesn’t uphold his oath, the laws of the land, or even his own laws, and expect stability to return to the monetary system?

  9. What is Wrong with the Fed’s Policies

    It is clear today – five years after our last crisis of 2008 – that the Federal Reserve’s program of “Large Scale Asset Purchases” (LSAP) is a losing proposition.

    It is undeniable that the Fed has conducted an all-out effort to restore normal economic conditions over the last five years; however, while monetary policy works with a lag, the LSAP shows no measurable benefit. This lapse of time is now far greater than even the longest of the lags measured in the extensive body of scholarly work regarding monetary policy.

    As I said it multiple times already, Quantitative easing never helped Main Street or the average American. It only helped big banks, corporations and investors alike. Not only have the Fed not improved matters, they have actually made economic conditions worse with their experiments.

    So what’s wrong with the Fed’s policies?

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