[animefan]

Open market operations can't really be characterized as lending to banks. Instead, the Fed buys various kinds of debt, especially US govt bonds, thus injecting money into the economy. The fed funds rate is really the rate at which banks lend to each other. Banks are privileged in that they have a special legal mandate to act as banks, but they are not privileged in terms of access to credit (they can borrow at the "discount window" but this is less important than the Fed's open market operations).

But more importantly, QE is more like injecting money into "real things" since it is buying corporate debt that presumably funds real projects. So the (alleged) failure of QE is not very good evidence for your claim that standard monetary policy is bad.

EDIT: and they main reason I and most economists prefer US style monetary policy is that it's very neutral: you have a lever, and that lever is how much bonds you buy. You can choose various flavors of bonds, and various maturities, but they are all fundamentally the same. In contrast, the government directly funding real projects lends itself to corruption and favoritism.

[pjmorris]

> You can choose various flavors of bonds, and various maturities, but they are all fundamentally the same.

It appears to me that you've just equated a US Treasury bond with a private label subprime RMBS. Is that a fair assessment? If so, how strongly do you feel about that equivalence? I see the private label RMBS's as less of a 'real thing'.

[animefan]

In the context of that sentence, I was referring to the bonds bought by open market operations, which are primarily US government bonds and would not include private label subprime RMBSs.

The kind of close-to-risk-free bonds bought in open market operations are all fundamentally the same because they simply move money from one point in time to another.

[toomuchtodo]

Isn't a treasury bond primarily funding social security, medicare, and defense spending (the three biggest US budget non-discretionary spending categories)?

[WesternStar]

While I agree that that both corruption and favoritism have negative effects on the investment environment and civil society. Wouldn't the money wasted in corruption and favoritism drive inflation even if only in the direct cost of the projects themselves.

[pjmorris]

> You can choose various flavors of bonds, and various maturities, but they are all fundamentally the same.

It appears to me that you've just equated a US Treasury bond with a private label subprime RMBS. How strongly do you feel about that equivalence?