Sumner argues that comparing US to Europe post 2011 is the counterfactual to show the efficacy of QE. Sumner suggests the US and Europe have had similar amounts of austerity so QE is what separates the two economies. Since 2011, the US - Europe unemployment gap has widened by 5%. Brent made a similar argument and stated something on the order of Greece might be considered as a counterfactual for how the U.S. poor would be doing in a comment to my post last month.
In that post, I followed Izzy's argument that QE was reinforcing the position of the elites and that low interest rates essentially were a tax to the wealthy savers and therefore "just". It would be fair to say that Sumner's post is an effective rebuttal against an assertion I made in my post "QE is policy that benefits the elite at the expense of the poor".
I think these comments were wrong. I think Sumner's (Brent's) counterfactual has merit. Clearly QE has had a positive impact on the US economy, (one that I had previously underestimated and had acknowledged publicly on these pages).
The labour market appears to be strengthening and the US economy may be poised for higher more consistent growth. This may mean that many of the issues I have been worrying about have been overdone and are set to ameliorate.
And yet, we are 5 years out from the start of the great recession and inequality in the US has been rising for the last 30 years. I would be all in favour of an "equability of opportunity not results economy", but we don't have that. Since the Reagan era we have increasingly seen the US move towards crony capitalism - the laws have been rewritten to support a disproportionate amount of income and wealth going to the few ( and by few I mean the 1 in 10,000). This "market" system is not natural or supported by economic theory.
The Fed's actions do not address these issues, and because they reinforce the existing elite structures and allow policy makers to not deal with the underlying issues in the economy may actually make the poor worse in the long run. This argument is similar to the one made by some legislators in the Tea Party who suggest that defaulting on the US debt is a good thing (which is why when I made it I acknowledged unconditionally it was an overreach).
I hope the benefits of QE outweigh the costs, I hope QE exit is easy for the Fed. I hope Europe China and Japan are able to navigate their challenges. I fear being right - not being wrong. I hope my fear and skepticism are unfounded. From a personal perspective, I have little to gain or lose from all but the most extreme negative outcomes of the distribution.
But I once again echo the words of Mark Thoma with respect to redistribution.
In that post, I followed Izzy's argument that QE was reinforcing the position of the elites and that low interest rates essentially were a tax to the wealthy savers and therefore "just". It would be fair to say that Sumner's post is an effective rebuttal against an assertion I made in my post "QE is policy that benefits the elite at the expense of the poor".
I think these comments were wrong. I think Sumner's (Brent's) counterfactual has merit. Clearly QE has had a positive impact on the US economy, (one that I had previously underestimated and had acknowledged publicly on these pages).
The labour market appears to be strengthening and the US economy may be poised for higher more consistent growth. This may mean that many of the issues I have been worrying about have been overdone and are set to ameliorate.
And yet, we are 5 years out from the start of the great recession and inequality in the US has been rising for the last 30 years. I would be all in favour of an "equability of opportunity not results economy", but we don't have that. Since the Reagan era we have increasingly seen the US move towards crony capitalism - the laws have been rewritten to support a disproportionate amount of income and wealth going to the few ( and by few I mean the 1 in 10,000). This "market" system is not natural or supported by economic theory.
The Fed's actions do not address these issues, and because they reinforce the existing elite structures and allow policy makers to not deal with the underlying issues in the economy may actually make the poor worse in the long run. This argument is similar to the one made by some legislators in the Tea Party who suggest that defaulting on the US debt is a good thing (which is why when I made it I acknowledged unconditionally it was an overreach).
I hope the benefits of QE outweigh the costs, I hope QE exit is easy for the Fed. I hope Europe China and Japan are able to navigate their challenges. I fear being right - not being wrong. I hope my fear and skepticism are unfounded. From a personal perspective, I have little to gain or lose from all but the most extreme negative outcomes of the distribution.
But I once again echo the words of Mark Thoma with respect to redistribution.
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