The Market, Not QE3

4 Replies

Daniel Kuehn writes,

What does the great jobs news say about QE3, given that a lot is revision of summer numbers? This is an economy healing itself. You can’t exactly credit fiscal policy, which has been the principle drag on growth lately. You can credit fiscal policy for avoiding a depression earlier on, I think.

My answer: I agree, neither fiscal policy nor QE3, but the market.

To clarify, Daniel is referring to the revision of employment figures. We all know I disagree with Daniel on fiscal policy in general, but it’s not an issue since he thinks that fiscal policy couldn’t have had an impact. Neither am I a fan of quantitative easing, but even if I were to concede that it could have a positive impact, QE3 is too recent to impact employment revisions. The third option is that the market is recovering on its own, and I think this is precisely what is happening.

(Of course, as one could probably guess, I’m of the opinion that it would have recovered much, much sooner had there been a “proper” period of liquidation.)

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  • Daniel Kuehn

    If someone finds a trailing tail of ARRA spending in the data I am of course willing to concede it did some good. The point, obviously, is that it didn’t itself reduce the unemployment rate by 0.3.

  • Daniel Kuehn

    Now that I think about it, of course, there are automatic stabilizers in play too. But they were always in play.

    Anyway… you all get what I’m saying :)

  • Juan Carlos Esguerra

    seriously?? we still beleive in the hoover moral theory of recessions after all these years? the system has to purge its ‘rottenness’? was that proved wrong long long ago?

    • http://economicthought.net/blog JCatalan

      Yes, some people still believe in the “moral theory of recessions” (not sure who branded it so poorly), if by that you mean the need to liquidate malinvestment. A minor historical side note though: Hoover wasn’t a liquidationist.