Thursday, September 6, 2012

Comfortable With Band Aids

Just listened to a couple of talking heads debate the efficacy of present Fed policy. Here's the tail-end.

Critic:Fed policy to this point has pushed asset prices higher but has had no impact on the economy.
Advocate: You can't say that. Because you can't prove the counterfactual - how bad things would have been without the Fed easing. But I bet you'll agree that without it the S&P 500 would not have stopped dropping at 666.
Critic: The system would have been cleansed without it.
Advocate: Yes, but at lower levels.

Save for the near-term economic impact, these men are basically in agreement. The system would be cleaner if the recession had been allowed to complete the job. However one is concerned with the healing of the economy, while the other is comfortable with band aids. Were they vying for the same office, whom, at this juncture, do you think would win? Yep. And that's a problem.

No comments:

Post a Comment