Bear Blowing Own Horn
Robert Waldmann
This isn’t original, although I don’t know who deserves the credit.
So, here it is: in effect, QE2 amounts to a decision by the US government to shorten the maturity of its outstanding debt, paying off long-term bonds while borrowing short-term.
[skip]
It’s just as if Treasury sold 3-month T-bills and used the proceeds to buy back 10-year bonds.
But why the Fed ? The Treasury is a huge player in the bond market. They are still selling long term bonds. Why ? What if the Treasury decided to finance the deficit with 1 and 3 month T-bills alone ?
No success link begging so far 🙁
update: Oh nooooo. Now Paul Krugman has found a link, but it isn’t to here on October 10 it is to EconoBrowser on October 3rd. “Missed it by that much” is a very week argument.
Same question, different thread:
Robert,
Have you changed your general opinion on quantitative easing since the last time (Nov 09) you posted on this subject?
Sunday, October 10, 2010, 11:47:21 PM
Uh oh. Uh what was my general opinion on November 9 ? What is my opinion now ? I really don’t know. I guess I don’t think that quantitative easing with quantities on the order of 2 trillion will do much. I guess it will help. I’m pretty sure it won’t hurt.
I think the only thing to do is get another stimulus bill through congress or maybe revive the economy by praying to aqua Buddha (seems as likely that aqua Buddha exists as that anything good will come out of congress).
On QE2, mostly I know that I don’t know and no one should care what I guess, because it’s just a guess.
This is it.
Quantitative EasingPosted by Robert 11/21/2009http://www.angrybearblog.com/2009/11/quantitative-easing.html
This is it.
Quantitative Easing
Posted by Robert 11/21/2009
http://www.angrybearblog.com/2009/11/quantitative-easing.html
QE2 only seems to work if it raises the cost of holding cash and incentivises business to invest that cash. 2 trillion probably is not enough to bring the long term rate down and move us away from the zero lower bound, but as you say, it won’t hurt. Targeted stimulus would seem to be the most efficient mechanism to get capital moving in a productive manner. But that is just a guess.