Wednesday, January 14, 2009

This makes teaching money and banking harder 

Federal Reserve Chairman Ben Bernanke, in remarks delivered in London today, said the Fed isn�t pursuing the quantitative easing approach to monetary policy that the Bank of Japan pursued from 2001 to 2006. That�s expanding the liability side of the central bank�s balance sheet, pumping more and more reserves into the banking system and targeting them at particular markets. In that approach, he said, �the composition of loans and securities on the asset side of the central bank�s balance sheet is incidental.�

The Fed, instead, is focused on the asset side of its balance sheet � �on the mix of loans securities it holds and on how this composition of assets affects credit conditions for households and businesses.� Call it �credit easing,� he said. The phrase was adopted by the Fed after pondering several other labels for its new approach.
Via the WSJ. This is, in fact, what Willem Buiter refers to as qualitative easing. Let me suggest that the first author of a money-and-banking text that has either qualitative or credit easing in its table of contents is going to make some sales.

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