QE3Submitted by Federal Farmer on Sun, 09/23/2012 - 21:35
If limited money printing didn't salvage the economy, doing it again without limits won't either.
By Robert P. Murphy • September 21, 2012
The Fed’s latest policy announcement—dubbed “QE3” by the pundits—has been fairly described as Bernanke going “all in.” Unfortunately, the Fed chairman is holding a losing hand, and he just wagered the entire economy. Printing money to “fix the economy” is exactly what got us into this mess, and it’s astonishing that so many analysts still fail to see the folly of the Fed’s actions during this crisis.
First of all, let’s review exactly what the Fed announced on September 13. Here is the key excerpt:
[T]he Committee agreed today to increase policy accommodation by purchasing additional agency mortgage-backed securities at a pace of $40 billion per month.…
The Committee will closely monitor incoming information on economic and financial developments in coming months. If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved…
To support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens.
In one sense, the Fed is simply doing more of the same. We have already seen unprecedented asset purchases—of both Treasuries and mortgage-backed securities—since the financial crisis struck in 2008, and yet the economy is still broken.