Is the Fed's stimulus a 'failure'?

In the wake of the financial meltdown, the Federal Reserve had some success goosing the economy and alleviating investor fears (particularly about deflation) by buying up huge amounts of government bonds — a tactic known as quantitative easing. Fed Chairman Ben Bernanke announced a second round of quantitative easing last August. But that so-called QE2, which involved buying $600 billion in federal debt, is now winding down, and many economists have judged its impact to be "surprisingly small" and "disappointing," reports Binyamin Appelbaum in The New York Times. Is the Fed's monetary stimulus experiment really a "failure"?

Yes, and it didn't take an economist to see it coming: You don't need Appelbaum's "terrific story" to see that QE2 failed to do much, says The New York Sun in an editorial. The dollar is weak, unemployment is high, and the price of groceries and gas are skyrocketing. And who predicted this? Sarah Palin, last November. When Bernanke meets the press this week, he may want to explain how Palin, "who is supposed to be so thick," figured this out before he did.

"Sarah Palin for the Fed?"

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No, QE2 worked just fine: The only thing disappointing here is Appelbaum's story, says Ryan Avent in The Economist. In fact, QE2 accomplished what "most reasonable onlookers expected": Bernanke was staring at a double-dip recession, the Fed stepped in, and the economy has improved measurably since. "The unemployment rate has fallen a full percentage point." The Fed did flub, though, in limiting its buy to $600 billion. Bigger would have been better.

"Who's disappointed in QE2?"

The Fed has too much on its plate already: Clearly, the Fed was hoping that its action would give a psychological boost to the markets, says Dave Schuler at The Glittering Eye. But is such "messaging" really the Fed's job? Don't forget the Federal Reserve's "impossibly difficult bundle of statutory responsibilities: It’s supposed to regulate banks, control inflation and, produce minimal unemployment." That's plenty without worrying about "messaging." Sam Goldwyn's wisecrack about the movies fits here, too: "If you want to send a message, use Western Union."

"Use Western Union"