07-06-2017, 09:48 AM
(07-05-2017, 11:40 AM)David Horn Wrote:(06-30-2017, 03:07 AM)Galen Wrote: You do realize that QE was implemented explicitly to keep asset prices up don't you? That regulations have costs and unintended consequences?
QE was intended to raise the money supply at a time of low monetary velocity, so yes, there was an anti-deflationary intent. You find that bad? Of the options, deflation is vastly worse than inflation.
On regulations: they have unintended consequences, and need to be updated to account for negative issues that may arise. Lack of regulation also has unintended consequences, but short of imposing regulations, there is no corrective. So, in short, regulation is virtually mandatory in an advanced economy.
It's far from clear that deflation is worse than inflation. The deflation of the 1920s didn't cause any major issues, while the inflation of the 1970s did.
That said, quantitative easing did not cause any big inflationary problems, either. What it did do was skew different types of securities, as the Fed preferentially invested in housing securities. This kept the housing bubble going to some extent, with attendant economic distortions.
Lack of regulations do not have a big unintended consequences issue, since you know the starting situation before regulations are imposed. Removing long standing existing regulations might theoretically have some unintended consequences, but they would still be less than with new regulations since one does have a baseline one knows about, even if it is an old baseline.