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Sunday, January 30, 2011

QE2 In Tones Of Gray

James Pethokoukis’s analysis on the Commentary website of the Fed’s QE2 monetary policy, The Problem with Printing Money, is a fairly evenhanded discussion.

A couple of quibbles:

One, Fed chairman Ben Bernanke is not “the foremost academic expert of his generation on the causes of the Great Depression.”

Two, Bernanke is completely wrong.  Tightening of the money supply by the Fed in 1927 did not cause the Great Depression.  The cause was the Fed’s six-fold expansion of the money supply in the preceding five or six years, which led to the same sort of boom misallocation of economic resources as occurred in the recent housing bubble.  The housing bubble was equally the result of massive over-exapnsion of the money supply by the Fed to support the stock market.

Posted by Thomas E. Brewton on 01/30 at 12:49 AM
Economics • (1) Comments
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