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January 14, 2013 1:05 pm | AEIdeas
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View related content: Economics, Pethokoukis
Economist Mike Darda of MKM Partners has put together a list of ten macroeconomic myths. Here are five concerning the Federal Reserve, quantitative easing, and the national debt, with charts:
James Pethokoukis @JimPethokoukis
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Minor point of order – the Fed did largely finance the deficit spending during QE2. Note the $700 billion increase in the monetary base between December 2010 and July 2011, which nearly covers the $809 billion in deficits run up during the same period.
To be fair, they haven’t done much since.
I don’t have much time for Darda. While I agree with some of his analysis I find that he thinks that he knows far more than he does and would stay away from many of his predictions because he understates the risks.
The Fed bought 77% of all new federal bonds in FY 2011. They are providing massive reserves in order to boost the banks. Their actions to drive down interest rates are forcing up values on Wall Street. Other than that, the Fed is doing nothing.
Between the Fed and federal deficit spending, our government is spending trillions per year in order to achieve $300 billion in economic growth. How long can they keep that Ponzi scheme afloat?
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