bobbyw24
11-18-2010, 05:52 AM
Last spring, in an effort to support the banks and attempt to drive liquidity to the mortgage market, the Fed chose to take on fiscal policy actions and purchase $1.25 trillion dollars of mortgages. While these actions appear to have provided a significant subsidy to the sellers of those assets, and to the marked values of assets held by investors, by increasing interest rate risk they effectively increased future systemic risks while doing very little for Main Street.
Now, as the Fed again launches another foray into an area that appears the domain of fiscal, not monetary authority, the supporters of the Federal Reserve’s “quantitative easing II” program have come out in force, wearing their neo-Keynesian credentials on their sleeves and waving their macro-economic models around like Excalibur. The same Fed that just announced a new Office of Financial Stability “to spot financial bubbles before they trigger financial crises” does not want anyone to notice the truth, namely that their models failed to predict any of the bubbles of the past 25 years and that its current policies are already inflating new and dangerous asset bubbles. In a blog post in defense of QE2, Paul Krugman goes after those of us who are against it and taunts us with "but what is their model? How do they think we got into a crisis that has depressed employment all around the advanced world?". Mr. Krugman, my model looks at reality and it has been more than accurate. How have the macro models of the Fed held up?
http://economics21.org/commentary/failed-models-real-costs-qe2
Now, as the Fed again launches another foray into an area that appears the domain of fiscal, not monetary authority, the supporters of the Federal Reserve’s “quantitative easing II” program have come out in force, wearing their neo-Keynesian credentials on their sleeves and waving their macro-economic models around like Excalibur. The same Fed that just announced a new Office of Financial Stability “to spot financial bubbles before they trigger financial crises” does not want anyone to notice the truth, namely that their models failed to predict any of the bubbles of the past 25 years and that its current policies are already inflating new and dangerous asset bubbles. In a blog post in defense of QE2, Paul Krugman goes after those of us who are against it and taunts us with "but what is their model? How do they think we got into a crisis that has depressed employment all around the advanced world?". Mr. Krugman, my model looks at reality and it has been more than accurate. How have the macro models of the Fed held up?
http://economics21.org/commentary/failed-models-real-costs-qe2