Quantitative Easing: The Exit Strategy

            The Fed has recently announced that it will renounce to Quantitative Easing policy. Alan Blinder has a very interesting material that explains pretty well the rationales for why has the FED chosen this approach, how was implemented and what are the exit strategies.

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Liquidity Trap Criticism

Quite surprisingly, although there is so much talk about the liquidity trap and its close concept, the zero lower bound (see the definition of liquidity trap), the criticism of these concepts is rather thin. This is even more puzzling since the liquidity trap concept is known for a long time, ever since Keynes proposed it (Rhodes did not find any mention of it in the work By Keynes).

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Is US in a Liquidity Trap?

Explaining the crises (not all, but many of them) as being liquidity traps is not only a misinterpretation but it also leads to false solutions. Just look at the case of Japan after two decades of “policy experiments”. (New) Keynesians like Krugman have reduced its stagnation problem to a liquidity trap and prescribed a wrong therapy which in the end failed to lead to real economic growth. But probably the case of Japan deserves a separate discussion.

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