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Notes to myself, possibly of interest to others.
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Wednesday, October 6, 2010

Krugman on QE2 - not a great idea?

From this:  I wanted and still want fiscal expansion because it’s relatively certain in its effect: if the government goes and buys a trillion dollars’ worth of stuff, that will create a lot of jobs. On the other hand, if the Fed goes out and buys a trillions dollars’ worth of long-term bonds, the effect is quite uncertain, with many possible slips between the cup and the lip

...nobody is sure how much effect quantitative easing will have on long-term rates; even a decade ago, I thought Ben Bernanke was too optimistic on that front...Furthermore, even if long rates can be reduced, how much effect will they have? Business investment is relatively insensitive to interest rates, mainly because equipment doesn’t have all that long a lifetime. Housing is the place where the rubber usually meets the road; but not in the aftermath of a huge bubble and vast overbuilding.

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