Economic Insights – October 2011

More than three years after the “financial panic” that defined the Great Recession, we find ourselves, once more, seemingly teetering on the edge of yet another recession. Three years of extremely loose monetary policy from the Federal Reserve have failed to deliver any real economic stimulus. QE1 and QE2 have created $1.6 trillion in excess banking reserves. But the banks have chosen to hold these reserves at the Fed rather than lend them out. Since mid-2008, the Fed has boosted the monetary base by 207 percent, while M2 has grown just 20 percent. Since it’s M2 that drive.....