Thursday, December 09, 2010

Explaining QE2

From an 11/30/2010 speech delivered by Benn Steil, winner of the 2010 Hayek award:

To grasp what we are getting ourselves into, consider this analogy: Imagine you get into the shower, turn on the water, and nothing comes out. You call the plumber. He tells you there's a hole in the pipe, and it will cost you a thousand dollars to repair it. You tell him just to turn up the water pressure instead.

Sound sensible? Well, this is the logic behind QE2, the Fed's strategy to keep flooding the money pipes until credit starts flowing freely again from banks to businesses.

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Always sniffing for the truth

Always sniffing for the truth

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