As much as is necessary, to hit the NGDP target." -- Nick Rowe
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| Total Assets of the Federal Reserve, almost Five Times what they were before the Crisis. So far. |
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| Total Assets of the Federal Reserve, almost Five Times what they were before the Crisis. So far. |
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.
ReplyDeleteThis graph shows what bank money would look like with and without Fed asset swapping.
http://research.stlouisfed.org/fred2/graph/?g=GJ3
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.
https://research.stlouisfed.org/publications/review/92/03/Depression_Mar_Apr1992.pdf
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.