QE2

This is to those who want to know a little more about QE2.

James Hamilton gives a very detailed and comprehensive description of what he believes QE2 is at here, here, here, here, here, here, here, here, here, and here.

To cut the long story short, Hamilton addressed the following:-

1. why the FED, not the Treasury (in theory, the proposed objective(s) of QE2 can also be achieved through Treasury operation)

2. the mechanism of QE2 (if you are really interested in QE2, you can read Hamilton and Wu's paper here)

3. QE2 is not the one and only one policy tool the FED has

4. the main objective of QE2 is to avoid deflation (ibid)

5. in endorsing QE2, the FED should keep watching commodity prices changes closely

For ordinary people like you and me, 2 and 4 are areas where we "should" pay our limited and scarce efforts on as they have strong implication(s) on portfolio management. In case you still have time after struggling on 2 and 4, you may wish to learn a little more about 3 and/or 5. 1 is for nerds.

A digress: what I think is "missing" in Hamilton's series of posts are

1) a normative fiscal policy recommendation and/or

2) a discussion of the (short/long term) effect of government expenditure under QE2 on the overall economy.

Economic Analysis

I don't like the idea of dividing the study of economics into microeconomics and macroeconomics. For me, what matters are:-

1) what are the "all other things remaining the same" in models on which economists keep drudging; and

2) the reasons behind the assumptions

It is not a "crime" to hold quantity supplied constant or to have prices remain unchanged, but it is a "crime" to "assume" such for pure analytical purpose(s) / convenience.

Mankiw's Choice

From Statistical Modeling, Causal Inference, and Social Science.

Mankiw's original article.

Mankiw's "partial"/"incomplete" response to some of the "diatribes"

What's "wrong", if any, with Gelman's reasoning?

Is little knowledge dangerous?

To write (blog) or not to write (blog), that's your question. ("Obviously", I prefer to be paid to write (or paid not to write); after all I am not live-to-work type of person.)

Perhaps, Ed has a good "answer" to "blog or no blog".