Bloomberg reports Federal Reserve Needs QE3 to Boost Economic Growth, Berkeley’s DeLong Says

The Federal Reserve should engage in another round of quantitative easing as growth in the U.S. economy remains slow and inflation concern remains low, according to Bradford DeLong of the University of California at Berkeley.

“I don’t see any argument against QE3,” Delong said during an interview on Bloomberg Television’s “Surveillance Midday” with Tom Keene. “The worry is always that it will destabilize inflation expectations, that they’ll lose their anchor, and yet when you look out as far as you can at the prices of the TIPS and of the 30-year Treasuries, you see no sign at all that there’s been any loss of confidence that the Fed will keep inflation under control.”

DeLong is Blind

The only way you cannot see any arguments against QE3 is if you are blind.

For starters, people on fixed income have been getting hammered. Food prices are up and so are energy bills and gasoline. Reported “inflation” is not up because the Fed does discounts food and energy prices.

I am not a big proponent of the rampant food inflation theory. However, for the first time in a long time, sale prices on food I buy is increasing.

Does Delong want gasoline prices at $6? We might see that on another round of QE. This view comes from a staunch deflationist (except I must point out I view inflation and deflation as a function of money supply and credit, not prices).

Regardless, 0% interest on CDs and savings accounts is hurting a lot of people. DeLong needs to read Hello Ben Bernanke, Meet “Stephanie”

One must also ask what good did QE2 do?

Banks did not increase lending, nor did businesses hire, nor did the housing market recover, nor did long-term interest rates drop. Those were the stated goals of QE2. I see 4 strikes. Delong cannot see that because he is blind.

What Delong suggests is so preposterous that it is hard for me to be polite. But polite I will be. The only way you cannot see any arguments against QE3 is if you are totally and completely blind.

Mike “Mish” Shedlock
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