Drowning the economy with yet more excessive easy credit is intended, says the Fed, to forestall deflation. The problem is that there is no deflation.
Economist Robert Murphy surveys the prospect.
QE2 and the Alleged Deflation Threat
Mises Daily: Thursday, October 21, 2010 by Robert P. Murphy
Quote:
The markets and financial pundits are all abuzz over the prospect of another round of quantitative easing — “QE2” — in which the Fed may start buying yet another trillion dollars in assets after the elections. The justification for this massive bout of new inflation is, of course, the threat of deflation.
But if we actually look for ourselves, we see that prices are not falling. The Fed has already fueled another boom in various asset prices, just as it did when trying to provide a “soft landing” after the dot-com crash. The economy will never truly recover until the government and central bank let the market process take its course.
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