The Fed & QE3+ explained: new AEI Economic Outlook

"QE3+ is an operation analogous to walking a tightrope over Niagara Falls. Success will be exhilarating, but failure will be ugly" – John Makin, AEI

In his September Economic Outlook, American Enterprise Institute (AEI) economist John Makin explains how the Federal Reserve's latest round of quantitative easing (what he terms QE3+) is supposed to work, and what could go awry.

He explains:

  • Risking Inflation: The Federal Reserve's recently announced QE3+ measures to encourage economic growth and reduce unemployment demonstrate a dedication to looser monetary policy, a risky approach that could bring higher inflation.
  •  
  • Indefinite Commitment: With QE3+, The Fed is committing to low interest rates and additional purchases of mortgage-backed securities indefinitely, until the labor market improves.
  •  
  • Path to Success: To be successful in this approach the Fed will have to monitor inflation expectations so as to not permanently boost inflation expectations.

You may also be interested in John Makin's reaction to the FOMC statement, which can be found here.

John Makin is a long-time Fed watcher with experience in academia, financial markets, and policy advising. He has advised the US Treasury, the Congressional Budget Office, and the International Monetary Fund. He is available for interviews and can be reached at jmakin@aei.org or through daniel.hanson@aei.org (202.862.5883).

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About the Author

 

John H.
Makin
  • John H. Makin is a resident scholar at the American Enterprise Institute (AEI) where he studies the US economy, monetary policy, financial markets, corporate taxation and banking. He also studies and writes frequently about Japanese, Chinese and European economic issues.

    Makin has served as a consultant to the US Treasury Department, the Congressional Budget Office, and the International Monetary Fund. He spent twenty years on Wall Street as the chief economist, and later as a principal of Caxton Associates a trading and investment firm. Earlier, Makin taught economics at various universities including the University of Virginia. He has also been a scholar at the Bank of Japan, the Federal Reserve Bank of San Francisco, the Federal Bank of Chicago, and the National Bureau of Economic Research. A prolific writer, Makin is the author of numerous books and articles on financial, monetary, and fiscal policy. Makin also writes AEI's monthly Economic Outlook which pairs insightful research with current economic topics.

    Makin received his doctorate and master’s degree in economics from University of Chicago, and bachelor’s degree in economics from Trinity College.


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  • Phone: 202-862-5828
    Email: jmakin@aei.org
  • Assistant Info

    Name: Brittany Pineros
    Phone: 202-862-5926
    Email: brittany.pineros@aei.org

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