Monday, May 27, 2013

Frances Coppola — Inflation, deflation and QE

From where I stand, QE looks like a very bad bet indeed. The benefits are uncertain and the downside risks huge. In my view it should be stopped. But you may not agree - and I know that many people are much more positive about QE. If you believe that overall its effects are beneficial to the economy, please do comment. Or even submit a post of your own arguing the opposite case.

And here is a final thought. It's all very well criticising QE, but what should we do instead? After all, we have stagnant economies, damaged banks, risk-averse corporates, highly-indebted households, high unemployment, under-employment, low productivity and falling real incomes. Doing nothing is not an option. If QE is a disaster, what is the alternative?
Warren Mosler said from the get-go that QE had a deflationary bias through the interest income channel, and MMT as a macro theory that resolves the trifecta of growth (production and productivity), employment, and price stability provides a complete solution to the crisis, chiefly through fiscal policy using the sectoral balance approach, functional finance, and the MMT JG, as well as proposals for reforming the financial system and economic policy that the led to the crisis.

Coppola Comment
Inflation, deflation and QE
Frances Coppola

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