Monthly Archives: October 2013

By Dan Kervick

Lacy Hunt reports on three recent academic studies indicating that the Fed’s unconventional asset purchasing programs have failed. Antonio Fatas is “sympathetic to the argument that Quantitative Easing has had a limited effect on GDP growth”, but takes issue with some parts of Hunt’s analysis, and argues that the way Hunt analyzes the relationship between reserves and the money multiplier “is not consistent with the conclusions reached about the lack of effectiveness of monetary policy actions.” I believe there are problems with both Hunt’s analysis and Fatas’s analysis of that analysis. My best guess is that QE has had negligible macroeconomic effects. But some of the considerations Hunt and Fatas adduce in attempting to evaluate that question are red herrings, and don’t get us closer to an answer.

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By Dan Kervick

A dogma can be a very powerful thing. When dogma is sufficiently powerful, the people in its grip can lose sight of who they are, where they have come from, and how they got from the place where they started to the place they now occupy. Americans during the past few decades have been in the grip of an especially strong dogma, the dogma of Market Fundamentalism. Falling in with the preachers and zealots of this charismatic sect, they have convinced themselves that their once lofty economic place in the world was primarily due to an American preference for miniscule government coupled with the visionary leadership of free-wheeling entrepreneurial heroes, latter-day secular saints who were able to set the economic agenda and pursue it unencumbered by regulatory ties. For some Americans, this mythic free enterprise utopia, bestridden by business titans, represents the very essence of American freedom. And so the free market faithful have pursued a neoliberal political agenda in order to see to it that the tablets of this magnificent ancestral wisdom are carried down unbroken into the present all-too-errant age.

But the creed is bunk. It is a fictive concoction filled with tales of an imagined past that never existed. And yet, the more enthusiastically the apostles of Market Fundamentalism have attempted to put the spurious creed into practice, the further they have taken us away from historical truth and the real-world sources of our actual prosperity. We need to drop the totemic legends and look that real history squarely in the face, so we can remember who we really are.

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