Thursday, July 31, 2014

"How much money should the central bank print and buy things with?

As much as is necessary, to hit the NGDP target." -- Nick Rowe

Total Assets of the Federal Reserve, almost Five Times what they were before the Crisis. So far.

1 comment:

jim said...

It seems pretty obvious that the intent of the Fed's policy is to maintain the growth of bank deposit money at the same pace it had been growing in the previous 2 decades.

This graph shows what bank money would look like with and without Fed asset swapping.

Without QE it is is likely that the quantity of bank deposit money would have fallen by more than the 40% that it contracted from 1929 to 1932.

The underlying assumption is that if the Fed allowed bank deposit money to fall (or even allowed it to not grow) the result would have been another great depression.

I think it is a pretty reckless attitude to take the position that if the Fed has the power to prevent a major bust it should go even farther and create a major boom.