QE Is Bad Policy, But Not For The Reasons You Think
QE is blamed for the recent inflationary surge by hard-money doctrines – the same hard-money doctrines that failed spectacularly in the previous decade.
QE didn’t produce any inflation in the 2010s, there is no reason to assume the 2020s will be any different, as QE has very little effect on the real economy.
What has changed is pandemic-induced supply dislocations and an effective fiscal policy response.
Since both of these can be deemed temporary, it isn’t unreasonable to assume inflation will also be temporary, even if that judgment might ultimately be proven wrong.
However, as pandemic disruptions endure, inflation may have reached escape velocity, after which it takes on a dynamic on its own. So the Fed is right in tightening policy.
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