[cthrow]

Alternative in 2008 was to let the banking system collapse, then rebuild from scratch.

Personally I believe many older/sick people would have died if central banks hadn't dropped interest rates and embarked on QE asset purchasing schemes to keep the system afloat.

Credit/lending would have all but disappeared for a while, many would have lost access to financial instruments necessary to secure housing, healthcare, insurance.

As a young person I'm not happy that we've propped up the status quo, that my rent is stupidly expensive, and that the majority of recovery has gone to the wealthy/those who owned existing equity/assets/real estate, but I can see why it was necessary.

[pishpash]

Dropping interest rates, backstopping systematically important institutions during the immediate crisis, and even the first QE were arguably necessary. The subsequent QE's and eight years of 0 interest rates were not.

[cthrow]

While it's easy to blame CB's for the past 8 years of stagnation in developed economies, I don't think it's their fault. It's also very hard to say what exactly is the right amount of repurchasing through QE (1.3T in QE1 vs. 4.5T total).

CB's just kept repurchasing until unemployment bottomed out, and now that we've hit the bottom, they will start to shrink their balance sheets. That's their mandate - maximize employment, keep consumer prices relatively stable.

All CBs can really do is make sure banks have enough money to lend into the economy by adjusting reserve requirements and interest rates. They could massively screw up the economy by jamming interest rates up right now, or dumping all their purchased QE assets back on the market, but they can't really improve the economy strictly through monetary policy.

That would require better fiscal and regulatory policy, such as tax code reform, increased spending on R&D and infrastructure, spend on education, etc. Even then it's not guaranteed this spending would lead to any technology-advancing breakthroughs that could raise the standard of living across the economy.

Ultimately I believe that low productivity (we've hit a ceiling on the returns to the internet, computer, and smartphone for the moment), plus a lot of the rest of the world catching up in terms of infrastructure, is to blame for the stagnation.

[pishpash]

Unemployment would have bottomed out regardless. QE did not speed it up or slow it down, and all of it went into boosting asset prices and malinvestment instead, that much is plain to see. In pegging rates to zero and compressing credit spreads, the central bank had essentially been telling everyone that there was no return in investing in the real economy and that there was not much difference between a good and a bad investment.

[cthrow]

I think we mostly agree, and I am pretty fed up with the situation too. It is painful to be raised in a system that seems to pride itself on freedom, social mobility, hard work, and meritocracy, and then to get into the labor force in the middle of a great stagnation and discover that reality is much different than the ideals you were raised to believe in.

I just don't have enough economic knowledge to say with confidence that unemployment would have bottomed out without QE2 and QE3, and that monetary policy post QE1 has been bad/unnecessary. I have to defer to CBs judgement on this matter.

If you have studies/data to the contrary I would definitely want to read them.

[cthrow]

Good timing actually - a paper came out today from the Federal Reserve Board. Supports the finding that QE1 and QE3 significantly lowered lending standards and increased risk taking among banks:

https://www.federalreserve.gov/econres/feds/files/2017093pap...

[mempko]

QE didn't increase money supply. The reason we had recovery at all was Obama running huge budget deficits.

[shrewduser]

QE does increase money supply by definition

[mempko]

No, fed bought bonds. That's like moving money from your savings to your checking account. In fact it likely decreased money supply because more money would have been created if bonds were held longer.