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Notes to myself, possibly of interest to others.
-- Bill Northlich

Tuesday, October 12, 2010

How to judge effectiveness of QE2 (if it happens)

...to judge whether QE2 is likely to stimulate the aggregate demand for U.S. goods and services, I will be observing the changes in another aggregate – the sum of Federal Reserve Bank credit and commercial bank credit. All else the same, when the commercial banking system increases its holdings of loans and securities, the recipients of this commercial bank credit are able to increase their current spending without any other entity in the economy having to cut back on its current spending. Similarly, an increase in Federal Reserve Bank credit enables the recipients of this credit to increase their current spending without any other entity in the economy having to cut back on its current spending.
---Paul Kasriel, Northern Trust

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