Over at Bloomberg View today, I write about the Fed’s latest move, and its critics.
Are there any dangers to QE3? Sure. The Fed shouldn’t get into the habit of thinking that it can painlessly boost real economic growth or employment by expanding the money supply. It is only under the unusual circumstances we face today — spending levels that the Fed has allowed to fall far below trend — that this policy makes sense. It would have been better for the Fed to say it would purchase assets until those spending levels rose back toward the pre-crisis trend. The more credible its commitment, the fewer purchases it would have to make.