Comment of the Day: I would not say that Kevin Warsh is innumerate—I have never seen him claim anything like 36.5/85 = 0.20—but he does not reason coherently:

Sans Souci: : "'Bernanke['s view]... may well be true according to economic textbooks'...

...DEPARTMENT OF "HUH!?!?": QE HAS RETARDED BUSINESS INVESTMENT!? http://www.bradford-delong.com/2015/10/department-of-huh-qe-has-retarded-business-investment.html... I score this for Bernanke: 6-0, 6-0, 6-0.

In fact, I do not even think that Spence and Warsh understand that one is supposed to have a racket in hand when one tries to play tennis. As I see it, the Fed's open-market operations have produced more spending--hence higher capacity utilization--and lower interest rates--hence more advantageous costs of finance--and we are supposed to believe that its policies "have hurt business investment"?!?!...

Ha ha ha ha ha...Mister, take your fancy book learnin' somewhere else!...

It was remarkable.

It was not a partial equilibrium argument—the partial-equilibrium argument is that QE increases the supply of loanable funds and so pushes business and the economy down and to the right along the investment curve, boosting investment. It was not a general equilibrium argument either. It was not a coherent general equilibrium argument either: corporate profits spent buying financial assets show up in the pockets of those who sold those financial assets, and they have to do something with that purchasing power—hold it, buy consumption goods with it, or invest it.

Here is Warsh-Spence in greater length:

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