A paper written by two staff members of the Federal Reserve Bank of Atlanta tried to quantify what all the Fed’s new money creation and related measures have accomplished. They conclude that unemployment today would be 0.13% higher without the radical measures and 1.0% higher if nothing at all had been done.
For some time, the Fed has been trying to demonstrate what its quantitative easing ( new money creation in plain language) has accomplished. This has not been easy. In the first place, the results have been poor, far below what the Fed hoped for. In the second place, the Fed did not even have a theory to explain why it would work. Without a theory, it has been difficult to build a quantifiable model that would evaluate results.
After many false starts, a few papers have emerged arguing that the Fed’s actions helped. But even these papers don’t argue that they helped much. And the story isn’t yet over.
Economist John Hussman has likened the Fed’s current financial policies to a Roach Motel, easy to get into, impossible to get out of. It will be interesting to see how the Fed tries to get out.