There Is Nothing in QE2 Worth Conserving | Mark A. Calabria | Cato Institute: Commentary

There Is Nothing in QE2 Worth Conserving | Mark A. Calabria | Cato Institute: Commentary: "First, the good professor argues that spending is far below trend. That is true enough as it goes, but this trend includes a massive housing bubble, where imaginary wealth fueled spending, aided by massive borrowing from abroad. The objective of our economic policies should not be to get back to the top of the previous bubble. It was this desire to replace the lost wealth of the dot-com crash that contributed to the Fed's juicing of the housing market. All that said, consumption today is higher than at any time during the recent bubble. The primary problem facing our economy is not a lack of demand.

Like Ben Bernanke, Beckworth believes we have had no inflation. Again like the Fed, he arrives at this conclusion by subtracting out of the inflation numbers all the things that real people spend their money on, such as food and energy."

"the good professor fails to consider that households may not be 'hoarding' cash by choice."

"Most market participants, me included, would be happy to put their money into valuable investments. Yet with interest rates near zero, there's little incentive not to hold cash balances, as the opportunity costs are nonexistent."