Tuesday, January 17, 2012

So How's QE2 Working Out?

QE2 ain't doing what Helicopter Ben thinks it should do.  Now he wants QE3?

With an increase of $1.8 Tn in base money supply since (roughly) '08, we find that bank loans divided by base money supply has dropped to ~2.5x from a high of 8x in late '07.  The overall average of that number from 1970 through '07 was ~6x.


More devastating to the monetarists:  M2 Money Supply divided by base money is now at ~3.5x--where the annual average from 1957-2008 was about 9.5x.

Lotsa chart-porn at Mish's place.


J. Strupp said...

This is why monetary AND fiscal policy must be coordinated. You can't simply print money and expect it to work through the system. Not at the zero bound you can't.

Uncle Sam has the ability to print AND spend, but they're trying to be half pregnant so the funds sit idle.

And yes, coordinating expansionary monetary and fiscal policy will create a certain amount of inflation (finally) and weaken the dollar (which is the point).

My guess is that Helicopter Ben is simply trying to stoke up inflation expectations by threatening further easing. Without another round of expansionary fiscal policy, it's probably going to be as ineffective as the last round of easing.

Anonymous said...

Mish is pretty smart.
Look at his latests......


busana muslim said...

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Anonymous said...

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