1. Central bankers should not claim credit for things they cannot control. Bernanke told us here how QE2 would work:
Stock prices rose and long-term interest rates fell when investors began to anticipate the most recent action. Easier financial conditions will promote economic growth.So, where is the economic growth we were promised? The employment/population ratio is still in the toilet, and by all reports the upcoming first-quarter 2011 GDP numbers will be weak. For anyone paying attention, Bernanke has now lost credibility.
2. Economists who might have supported your policies will run the other way when the going gets tough. When QE2 was announced, Mark Thoma seemed to like it, but had some quibbles. He thought it wasn't big enough, and that the Fed should be purchasing longer-maturity Treasuries. The New York Times now quotes him as saying:
It’s good for stopping the fall, but for actually turning things around and driving the recovery, I just don’t think monetary policy has that power
3. The Fed is seen as screwing up, so everyone wants to butt in with their own stupid suggestions. Here are some examples. The first is the suggestion, again, that it's not working because the Fed is not doing enough, i.e. it should buy all of the available Treasury debt:
The Fed limited the program to $600 billion under considerable political pressure. While that sounds like a lot of money, the purchases have not even kept pace with the government’s issuance of new debt, so in a sense the effort has amounted to treading water.So, quit treading water, and swim across the Pacific Ocean. Here's another wonderful idea:
a growing body of research suggests that the Fed could have had a larger impact by spending more money on a broader range of debt, like mortgage bonds, as it did initially.So, quit buying Treasury bonds, and go back to purchasing mortgage-backed securities (MBS), or some other private assets. The QE1 program (purchases of MBS and agency securities of more than $1.2 trillion) set a dangerous precedent. Clearly, if you do this once, you can do it again, on demand. Programs like this can be used to bail out sectors of the economy or individual firms, and using them threatens the Fed's independence.
Charles Plosser certainly comes off well. The guy has good sense, and integrity:
“I wasn’t a big fan of it in the first place,” said Charles I. Plosser, president of the Federal Reserve Bank of Philadelphia and one of the 10 members of the Fed’s policy-making board. “I didn’t think it was going to have much of an impact, and it complicated the exit strategy. And what we’ve seen has not changed my mind.”