There's a problem with the transmission.... In my last post , I pointed out that QE does not work when the transmission mechanism for monetary policy is impaired because of a damaged and risk-averse financial sector.
This caused some confusion among those who think that throwing money at banks automatically makes them lend, so I attempted to explain it on twitter. Predictably, I ended up in an extended discussion first with David Beckworth and then with Andrew Lilico, in the course of which it became clear - to me, at any rate - that not only does QE fail when damaged banks aren't lending normally, but it actually impairs the transmission mechanism itself. THE GOLD STANDARD AND THE ORIGINS OF THE MODERN INTERNATIONAL MONETARY SYSTEM. Target2 Redux_CEPR 2 _3. Currencies: The weak shall inherit the earth. Can the Fed create demand. The Recovery and Monetary Policy. Remarks at the National Association for Business Economics Annual Meeting, New York City As prepared for delivery Good morning.
It is a pleasure to have the opportunity to speak at this NABE (National Association for Business Economics) conference today.