Wednesday, 8 January 2014

The Fed Does Not Know How Quantitative Easing Policies Work To Help The Economy

Dr Mark Thornton writes today,
Amazing! According to a Reuters Report, President of the Federal Reserve Bank of New York William Dudley admitted that the Fed does not know how Quantitative Easing policies work to help the economy and that they don’t have a well developed model of the economy that incorporates a “realistic” financial sector.
Yet “we still don’t have well-developed macro-models that incorporate a realistic financial sector,’ William Dudley, president of the New York Fed, told an economics conference.
“We don’t understand fully how large-scale asset purchase programs work to ease financial market conditions, there’s still a lot of debate …” he said. “Is it the effect of the purchases on the portfolios of private investors, or alternatively is the major channel one of signaling?”
Is the Fed already preparing the defence for next financial meltdown? Or excusing the lack of results on employment following US$ 3+ trillions in QE post Lehman? After all, the Fed's primary concern is taking care of the banking sector, with tax payer money. Everything else is just for shows.