DeLong Smackdown Watch: Against Money-Financed Fiscal Expansion, For Open Market Operations in Equity Indexes
Hoisted from comments: Nick Rowe writes:
Why Quantitative Easing Needs to Involve Securities Other than Government Securities: OK. Start with the Fed buying bridges. That will work. Now, wouldn't it be nice if the Fed could also sell those bridges again later, if it needs to, as it probably will. Bridges aren't very liquid. And, the Fed is good at clipping coupons on bonds, but perhaps not very experienced at collecting tolls on bridges. Hmmm. Maybe if the Fed just bought shares in bridges instead, that would be as good as bridges, but even better from the practical point of view. Hmmm. Why stop at bridges? Why not buy shares in everything? Why not just buy the Wilshire 5000, or some such index?