QE2: Meh
Seconding Brad DeLong here.
Conventional monetary policy involves buying short-term government debt; it has no traction now because interest rates on short-term debt are near zero.
So now the Fed is buying longer-term debt — but still only 5-year debt, with a current interest rate of slightly over 1 percent. How much more effective is that likely to be?
And $600 billion really isn’t a lot when you’re trying to move a $15 trillion economy.
One more thing: the Fed statement basically reaffirms the existing inflation target, it doesn’t raise it. So not much traction on the expectations side either.
In short: meh.
Quote from: http://krugman.blogs.nytimes.com/2010/11/03/qe2-meh/
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