My blog explores the financial crash, the rediscovery of Keynes, the debate between Keynes and the monetarists, the laissez-faire school versus the Keynesian school , the state of modern macroeconomics, the problems of unemployment,economic growth,international trade, public debt and deficits and the issue of inflation versus deflation. It reviews and debates economic policy in North America, Europe and Asia.It also from time to time comments upon culture, cinema and politics.
Thursday, February 24, 2011
Rediscovering Keynes,the crash and origins of Quantitative Easing
Good draft. Lots of interesting insight. In regard to QE, I think what has made it acceptable these days is that since 2008 the Fed has started paying interest on excess reserves. This acts as a disincentive for banks to lend the excess or to expand the money supply by increasing loans (which for central bankers has always been the fear). In effect, it nullifies the money multiplier.
that is an interesting observation. but we need to work through the consequences of that policy twist to see how it affects overall interest rates in other words the feedback mechanism from one to the other since acquiring the debt temporarily is intended to prevent bond market Blackmail paying interest on the reserves seems likely to defeat the original policy.
Good draft. Lots of interesting insight. In regard to QE, I think what has made it acceptable these days is that since 2008 the Fed has started paying interest on excess reserves. This acts as a disincentive for banks to lend the excess or to expand the money supply by increasing loans (which for central bankers has always been the fear). In effect, it nullifies the money multiplier.
ReplyDeletethat is an interesting observation. but we need to work through the consequences of that policy twist to see how it affects overall interest rates in other words the feedback mechanism from one to the other since acquiring the debt temporarily is intended to prevent bond market
ReplyDeleteBlackmail paying interest on the reserves seems likely to defeat the original policy.