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> Because monetary policy is more effective than fiscal policy? It’s difficult to justify such a broad statement. Consider that the Fed likely deepened and len
by nickles 7y ago
> Because monetary policy is more effective than fiscal policy?
It’s difficult to justify such a broad statement. Consider that the Fed likely deepened and lengthened the Great Recession by reducing the availability of liquid assets (QE) and simultaneously encouraging banks not to lend out the bank reserves they received in the process (IOER).
- ikeboy 7y agoThe Fed making mistakes doesn't mean the claim is wrong. My understanding was that QE helped, but IOER was a mistake.
- nickles 7y ago> The Fed making mistakes doesn't mean the claim is wrong. I was trying to highlight that policy missteps are damaging and can occur with either monetary or fiscal policy. > My understanding was that QE helped, but IOER was a mistake. I’m familiar with an argument that QE1 was effective while QE2 and QE3 failed to provide the same degree of stimulus, but I can’t recall the substance at the moment. Comparing the QE responses of US, Eurozone, and Chinese central banks indicates QE did stabilize economies, but it also drained liquid, fungible assets from the market at a time where liquidity was most needed.