Why didn't Helicopter Ben use his helicopter?

[KrazyHorse]

Thank you for your contribution!

[Egbert]

Always glad to help.

[Tupac Shakur]

The Federal Reserve’s experiment with a second round of quantitative easing is nearing an end. Did it achieve its goal of lowering interest rates and stimulating the economy?

Should we remember QE2 as a brilliant innovation, a central piece of the Fed’s future recession and deflation-fighting toolkit? Or is it the first step toward hyperinflation? When the Fed stops buying government bonds, will interest rates rise sharply because no one else is buying?

In fact, QE2 didn't stimulate the economy, as the left had hoped, nor will it lead to the inflationary or bond-market disaster feared by the right. QE2 did basically nothing. But that is a deep and unsettling lesson: The Fed is essentially helpless in the current situation.

http://www.bloomberg.com/news/2011-06-02/is-qe2-a-savior-inflator-or-a-dud-business-class.html

More at the link. Thoughts? I think there's probably a lot of truth to the contention that the Fed has far less power over the economy than is widely believed and that the rest of the federal government has responded quite poorly to the economic crisis. Not sure I accept that there's a linkage between the two, however; Congress would probably still be worthless and focused on irrelevant priorities even if they knew they couldn't rely on the Fed to fix things for them.

[C0ckney]

i think spending $100s billions to do 'basically nothing' counts as a failure.

[Tupac Shakur]

The Fed didn't "spend" hundreds of billions of dollars.

[giblets]

Yes, it exchanged hundreds of billions of dollars for assets.

[Tupac Shakur]

Closer, but still not on the mark.

[Tupac Shakur]

Callback!

"The Ben Bernank"

That video was pretty misguided, but I appreciate the reference.

[Jon Miller]

http://www.economist.com/blogs/buttonwood/2011/06/inflation-equality-and-debt-crisis?fsrc=scn/fb/wl/bl/whosuffersfrominflation

This suggests that modern inflation is hitting poor harder, because inflation mostly is in the necessary goods like food. So poor people might face an effective inflation of ~5% while wealthy people face effective inflation of ~2%.

Maybe effective inflation needs to be considered?

JM

[giblets]

Is it even possible for the fed to alter the disparity in inflation rates faced by the poor and rich? I think the increasing food prices are caused by forces beyond the fed's control.

[Tupac Shakur]

I think the increasing food prices are caused by forces beyond the fed's control.

Agreed.

[Dinner]

Really? Because core inflation is still nil. There will be no problem mopping this up...

Yeah, but isn't it a bit too late once inflation does show it's ugly head? Better to do it slow and steady then too much and over shoot the mark.

[Dinner]

Agreed.

Ethanol is part of it but world food prices have been going up for a very long time at near record paces much beyond just the US. My understanding is that so much of the third world suddenly has money and is now demanding meat that that is the main issue. The secondary issue is the massive increase in petroleum based fertilizers around the world combined with the increase in petrol prices (which, once again, is caused by big increases in world demand due to 3rd worlders becoming motorized for the first time). That means the costs of inputs like fertilizers is going up, transport costs are going up, while demand is sky rocketing because it takes so much grain to feed live stock. The end result is record food prices year after year.

Sure, I'd love to kill corn based ethanol because it's a complete waste which uses more oil equivalents then it creates (it's a net negative process) but it's also a political bribe to ****ty states in fly over country which they'll never give up.

[Barnabas]

Oerdin, is there some ethanol that is not a waste?

[Kuciwalker]

http://www.economist.com/blogs/butto...sfrominflation

This suggests that modern inflation is hitting poor harder, because inflation mostly is in the necessary goods like food. So poor people might face an effective inflation of ~5% while wealthy people face effective inflation of ~2%.

Maybe effective inflation needs to be considered?

JM

I don't think you understand the reason the Fed targets inflation/the price level. The purpose is not to keep stuff from getting more expensive relative to wages, which is well beyond the Fed's abilities.