Wednesday, August 24, 2011

QE Infinity

When I think about our monetary policy (which I do a lot these days), I become a little confused, because it's so darn easy to understand... The Fed, chaired by Ben Bernanke - the kid who (legend has it), at seventeen, taught himself calculus - employs a policy so simplistic and, alas, so seemingly ineffective...

George Mason University Professor Don Boudreaux, blogging at, puts it this way;
"It’s as if a person who is bleeding to death because of a gunshot wound in his stomach is brought to a physician.  The physician correctly realizes that the patient is losing massive amounts of blood and, also, correctly understands that such blood loss is dangerous to the patient’s health.


So the physician prescribes massive infusions of blood, period.  If the patient doesn’t recover, the physician orders that the volume of blood-infusions be increased.  If the patient dies, the physician will forever blame himself for not increasing the volume of blood-infusions even further.


If the patient does recover, the blood-infusions will be praised for saving the patient.”

I.e., the Keynesian-minded supporters of QE 1, 2, 3, Infinity, and fiscal stimulus (be it payroll tax holidays, cash for clunkers, money for Milk Duds, unemployment insurance extensions, etc.), would have us believe that the economy struggles because the programs were too small… That the volume of infusions needs to be stepped up substantially and right away…  And if they’re not (stepped up), and we double-dip back into recession, the insufficient volume of infusions will be the cause…

Like I said in A Thousand Miles per Gallon, we’re (for the moment) “at the mercy of a few very bright, academically-gifted appointees who’ve proven to be most adept at test-taking and, alas, mess-making…”

Stay tuned…



  1. Marty,
    Good analogy with the blood-infusion, like it.

  2. Like any wound, it needs to be cleaned and closed first or the infusion doesn't matter.