Quantitative Easing vs. Austerity: who won?

[Aimless]

It's been a few years so it should be possible to score the two somewhat more objectively than we could back when the debate was at its most intense.

So: Which side was right about what and to what extent? What did each side get wrong?

[earthJoker]

You are comparing apples with oranges IMO. Quantitative easing has nothing to do with government spendings.

[RandBlade]

If you mean government spending v austerity then smart austerity has worked.

[Being]

If you mean government spending v austerity then smart austerity has worked.

Equating government spending with printing money??

[Being]

Aimless

Quantitative Easing vs. Austerity: who won?
It's been a few years so it should be possible to score the two somewhat more objectively than we could back when the debate was at its most intense.

So: Which side was right about what and to what extent? What did each side get wrong?

Is negative interest rates austerity or quantitative easing?

[GGT]

I watched some of the live hearings on C-Span recently, when Chairman Yellen was explaining the Fed's goals and tools to the House. (Can't remember which committee or sub-committee )

She suggested that negative interest rates might part of their toolbox......but couldn't say that it was totally legal, or in accordance with their congressional mandates. WTF?

[Aimless]

You are comparing apples with oranges IMO. Quantitative easing has nothing to do with government spendings.

Both are fruits that may be used to stave off hunger and the question is about which fruit is better at accomplishing that task. A while back, there was some debate as to whether or not the British response to the financial crisis was as good as or even better than eg. that of the US. Many claims were made on both sides and there was a lot of talk about studies showing conclusively that one side or the other was right. We're now able to evaluate some of those claims and I'd like to know, in as clear and unambiguous wording as possible, who was right about what.

Since I'm not provocative enough, here're some more provocative texts:

http://blogs.worldbank.org/futuredev...-false-dilemma

http://www.economist.com/blogs/butto.../fiscal-policy

http://www.economist.com/news/school...s-surge-public

http://www.theguardian.com/business/...erity-delusion

[RandBlade]

Is negative interest rates austerity or quantitative easing?

QE.

[Being]

QE.

And is QE Government spending or printing money?

[Lewkowski]

Aimeless have you read much Krugman? The guy is a firm believer of inflating our way out of debt... I wouldn't touch his thoughts with a 10 foot pole.

[Aimless]

I decided to post views from several sources for several reasons, one of which was to avoid facile non-analyses motivated by Krugman's clear position on the matter. Ignore that article or just pretend it wasn't written by him so that you can focus on the claims and the evidence presented. Or, better yet, give us the most objective analysis possible on who was right about what.

[RandBlade]

And is QE Government spending or printing money?

Neither. Those are both fiscal policy, QE is monetary policy.

Krugman is a joker, a broken record parody of someone who used to think about economics who has got all his projections and claims wrong for years. If you want to post claims or evidence why not snip and post the relevant parts you want to discuss?

[Aimless]

There are several articles linked that were not written by Krugman. Go ahead

[RandBlade]

No thanks, don't have time to follow links and read dozens of articles right now. Quote parts that are relevant on the thread and I'll look at those.

[Being]

Neither. Those are both fiscal policy, QE is monetary policy.

Krugman is a joker, a broken record parody of someone who used to think about economics who has got all his projections and claims wrong for years. If you want to post claims or evidence why not snip and post the relevant parts you want to discuss?

QE = expanding the money supply = printing money.

[Lewkowski]

I decided to post views from several sources for several reasons, one of which was to avoid facile non-analyses motivated by Krugman's clear position on the matter. Ignore that article or just pretend it wasn't written by him so that you can focus on the claims and the evidence presented. Or, better yet, give us the most objective analysis possible on who was right about what.

Based on how GDP is calculated, more government spending will always increase GDP. Austerity will always inflict short term hardship(unless it comes along with an immediate increase in credit rating however for most of the '1st world' that isn't a major factor. In the long term having a sensible policy toward debt and revenue is healthy. The folks in the Krugman camp have this argument:

Inflation is OK because it helps the poor and hurts the rich. (Debt is less burdensome)
You should spend a lot of money in economic down turns and spend less in up swings. (This rarely occurs, most countries spend more money each and every year). This also runs afoul with how well the government can actually interpret the moving economy and the time it takes for its actions to have an impact.

Those who propose massive increases in debt either don't care about wealth being destroyed via inflation or don't mind saddling the next generation with debt. Which option sounds good to you?

[RandBlade]

QE = expanding the money supply = printing money.

No it's not. You are overly simplistic and wrong.

[Being]

No it's not. You are overly simplistic and wrong.

PDF ALERT!!! I know some of you fear them.

http://www.bankofengland.co.uk/monet...e-pamphlet.pdf

[earthJoker]

Both are fruits that may be used to stave off hunger and the question is about which fruit is better at accomplishing that task.

No they don't have the same task. And they don't even exclude each other. A country can have austerity and quantitative easing at the same time. For example Germany.

[wiggin]

No they don't have the same task. And they don't even exclude each other. A country can have austerity and quantitative easing at the same time. For example Germany.

Perhaps a much better question is whether loose monetary policy (almost universal in the developed world, albeit to different degrees) is useful without the appropriate fiscal policies and structural reforms (which have differed wildly across the developed world). Obviously comparing unconventional loose monetary policy with fiscal austerity is both silly and meaningless.

[RandBlade]

PDF ALERT!!! I know some of you fear them.

http://www.bankofengland.co.uk/monet...e-pamphlet.pdf

Nothing in that PDF says that it is "= printing money"

Quite the opposite in fact. Printing money is inflationary because that expands the monetary supply permanently. Yes QE's aim is to increase money supply but it is not printing money, QE temporarily expands the monetary supply putting temporary upwards pressure on inflation (which is desired to avoid deflation) but if inflation starts to become too high then the QE is simply reversed thus putting downwards pressure on inflation. That is the key difference between QE and printing money, printing money doesn't have that safety. This is explained in part on page 14 of the PDF if you'd bothered to read it.

So as I said, you are overly simplistic and wrong.

[RandBlade]

No they don't have the same task. And they don't even exclude each other. A country can have austerity and quantitative easing at the same time. For example Germany.

Indeed, or the UK, or to a lesser extent on austerity the USA.

[Being]

Nothing in that PDF says that it is "= printing money"

Quite the opposite in fact. Printing money is inflationary because that expands the monetary supply permanently. Yes QE's aim is to increase money supply but it is not printing money, QE temporarily expands the monetary supply putting temporary upwards pressure on inflation (which is desired to avoid deflation) but if inflation starts to become too high then the QE is simply reversed thus putting downwards pressure on inflation. That is the key difference between QE and printing money, printing money doesn't have that safety. This is explained in part on page 14 of the PDF if you'd bothered to read it.

So as I said, you are overly simplistic and wrong.

I am not wrong but you are smug so I doubt you want to learn anything.

https://en.wikipedia.org/wiki/Money_creation

Money creation is the process by which the money supply of a country or a monetary region (such as the Eurozone) is increased. A central bank may introduce new money into the economy (termed "expansionary monetary policy", or "money printing" by detractors) by purchasing financial assets or lending money to financial institutions.

Your homework assignment is to find the part in that article that explains how QE is money printing. It's there so don't just smugly reject it.

[RandBlade]

No it is not.

[Dreadnaught]

Being, QE is printing money because the central bank buying assets is using money that they created out of thin air. That money goes into the financial system.

EDIT: Wait, I lost track of who is saying what here

[Being]

Being, QE is printing money because the central bank buying assets is using money that they created out of thin air. That money goes into the financial system.

EDIT: Wait, I lost track of who is saying what here

Been a while since you and I have agreed.

[RandBlade]

But it still isn't printing money.

[GGT]

A while back, there was some debate as to whether or not the British response to the financial crisis was as good as or even better than eg. that of the US. Many claims were made on both sides and there was a lot of talk about studies showing conclusively that one side or the other was right. We're now able to evaluate some of those claims and I'd like to know, in as clear and unambiguous wording as possible, who was right about what.

Since all developed economies used a combination of austerity (cutting gov't spending) and QE (central banks loosening monetary policy).....it's pretty hard to compare those things in deciding whose policies were better, or who was right about what. It's probably better to look at data economists use -- like jobs created, employment/unemployment numbers, along with GDP and other economic data -- that signal a "recovery".

Everything I've read suggests the US economy has had a "better recovery" than the UK (or any European nation for that matter) because we've got nearly full employment, with low inflation, and a strong currency. (We may have a benefit with the USD being the world's favored currency, but that comes with its own issues that could be a thread on its own.)

Some European nations -- and US states -- were already in a Depression before the Great Recession hit, so digging out has been harder for some. The main issue then turns to political alliances. Since there's no way to fix political problems using monetary policy alone, and both the US and Europe have tons of political problems, the jury is still out on the "right" combination of austerity and QE. That probably matters more in Europe because of the EU/Eurozone experiment, with emerging ideas like Grexit, and now a possible Brexit.

[RandBlade]

Apples and oranges. Grexit is spoken about because despite the Greeks wanting the Euro they can't afford it. Brexit is spoken about because despite the fact we can afford the EU we don't know if we want it. Those two are diametrically opposite.

The UK too has full employment and growth and low inflation so that comparison is moot. The dollar is stronger compared to Sterling but that is mainly due to the Fed raising rates and uncertainty over our future in Europe. Not because one country is doing better than the other.

[GGT]

So, you're saying the UK has recovered from The Great Recession better than the US has?