November 17, 2010
THEY CAN'T INFLATE ENOUGH TO COUNTERACT THE DEFLATION:
QE2 (Greg Mankiw, 11/17/10)
Several people have asked my opinion of the Federal Reserve's new round of quantitative easing. In particular, some have noted that I did not sign the open letter by conservative economists critical of recent Fed actions.Posted by Orrin Judd at November 17, 2010 5:24 PM
My view is that QE2 is a modestly good idea. I say it is a "good idea" because, like Ben Bernanke, I am more worried at the moment about Japanese-style deflation and stagnation than I am about excessive inflation. By lowering long-term real interest rates below where they otherwise would be, QE2 should help expand aggregate demand. I include the modifier "modestly" because I don't expect these actions to have a very large effect.