QE2 was a bust:I've only snipped the first two paragraphs from this story, but that much is enough to contain two fundamental and oft-repeated errors which I've resisted commenting about in the past, but can resist no longer.
Economic data is worse than before
BOSTON (MarketWatch) — It‘s cost $600 billion of your money. And it was supposed to rescue the economy. But has Ben Bernanke’s huge financial stimulus package, known as “Quantitative Easing 2,” actually worked as planned?
QE2 is being wound down in the next few weeks. Fed Chairman Ben Bernanke has said it has left the economy “moving in the right direction.” But an analysis of the real numbers tells a very different story.
Correction #1. You can't tell if QE2 worked by simply looking at actual economic data. Why? Because you need to compare it to something. So in order to tell the effects of any particular policy you have to compare actual economic data with what would have happened in the absence of the policy. I have yet to see a critic of QE2 attempt to make the correct comparison.
Correction #2. QE2 didn't cost anything. Nothing. Nada. All that happened was that the Fed bought a bunch of long-term assets. The money didn't disappear. The Fed still has that $600 billion; it's just in the form of long-term bonds now.
Oh, and then of course this column makes the other common mistakes about the Fed's purchases of long-term assets, implying that QE2 is the same as money creation (which it isn't), and that it has caused inflation (which it hasn't). Okay, time to stop reading.