Is Quantitative Easing the Right Policy

The Fed's recent announcement of pursuing additional Quantitative Easing--now called QEinfinity by some or QEp (p for perpetual)--keeps monetary policy in the foreground.  Scott Sumner is the best known advocate of nominal GDP targeting--the idea the Fed should target a nominal rate of GDP growth, perhaps 5%, with the idea that ultimately it will help get to 3% real GDP growth.  Tyler Cowen in his Marginal Revolution blog has several good posts on it.  He supports the idea but is concerned about the linkages that will or should or might lead to the growth of real GDP.  Today's Wall Street Journal has an op-ed piece that claims the easy money of the Fed is punishing the middle class.  It is worth a read.

I am less certain about nominal GDP targeting as the cure. Like Cowen, it can sound rather mechanical.  Whether one agrees with the op-ed piece I cite above, it is clear that easy money is punishing savers, including most retirees.

Two Links of Interest

Saturdays WSJ had an interesting op-ed by Joseph Stiglitz on why quantitative easing will not succeed. The linkages between quantitative easing and business activity are tenuous, which seems to be the case to me as well.

On a different area, Bernanke gave a talk today about housing markets. His written remarks are here.