“Any serious Fed follower needs to read Mr. Thornton’s (of the Cato Institute), Requiem for QE. It’s sure is a lot different than Bernanke’s historical account in The Courage to Act! I believe it shows exactly why The Fed fights so hard not to be audited…

…It’s like they are the “wizard” behind the curtain in the Wizard of Oz and don’t want to be exposed (their supposed monetary policy expertise) as a fraud. Think about it, why are the FOMC minutes not disclosed for five years? I think the number one reason is to save the powerful Fed members from embarrassment (and help foster their Wizard of Oz aura). How many people like Mr. Thornton are really interested in reviewing these FOMC minutes five years later (he’s only doing it because it was an extraordinary time)? Not many, so no Fed accountability. Come on, these FOMC minutes aren’t top secret. The disclosure delay should be a year or less. This is America not some totalitarian country.”, Mike Perry, former Chairman and CEO, IndyMac Bank

Selected Excerpts from November 17, 2015, Requiem for QE:

“Contrary to what many have supposed, QE was not the culmination of an intense discussion by the FOMC about the appropriate policy response to the crisis. Rather, QE occurred when the FOMC was forced to abandon its funds-rate operating procedure because it was no longer able to sterilize its lending after the Lehman Brothers bankruptcy announcement. It’s disconcerting that QE;’s theoretical foundations evolved well after the basic structure of the program was finalized–that the so-called “theoretical foundations” were, in fact, ex-post rationalizations. What’s worse is those rationalizations were extraordinarily weak…..the evidence that QE has an economically significant effect on output and employment is nonexistent.”

“Another worrisome aspect of this (QE) episode in monetary policy is that, following its failure to prevent a collapse of credit, the FOMC lost all confidence in the ability of market economies to heal themselves, and subsequently assumed that only monetary and fiscal policy actions could restore the economy’s health. The FOMC’s failure to recognize that economic recovery takes time led it to engage in extraordinary actions, the effectiveness of which FOMC members themselves doubted.”

“QE did have unintended consequences, however. Income was redistributed away from people on fixed incomes and toward better-off investors, while pension funds were forced to hold securities with greater default risk. Other problems may yet materialize: the distorted markets and excessive risk-taking encouraged by QE could lead to renewed economic instability…”

“Ultimately, QE did little good and likely sowed the seeds for future economic problems.”

Requiem for QE, Daniel L. Thornton

Posted on November 20, 2015, in Postings. Bookmark the permalink. Leave a comment.

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