They're not extending an open credit line to banks in order to revive the economy:
“Monetary policy is about as easy as it can get,” said Mr Volcker, who built a reputation for quelling inflation through the unpopular decision of raising interest rates during his tenure at the US central bank. “Another round of QE is understandable---but it will fail to fix the problem. There is so much liquidity in the market that adding more is not going to change the economy.”
The problem is where all that liquidity is going---or more accurately, not going---and that all of this easing from the Fed is not intended to incentivize our job creators to hire people but to continue the long-term process of repairing the balance sheets of a bunch of over-leveraged and insolvent-in-all-but-name financial institutions. If they really cared about providing some direct stimulus, they'd just mail out $40 billion a month in checks to every working-age American (about $3,200 per year) because, well, we know it's more effective than taking reams of damaged commercial paper off the banks' accounting ledgers. Also, too, because you can't eat a mortgage-backed security, or use one to pay down your mortgage, or pay the orthodontist for your kids' braces with one, but an extra three grand a year would make a great deal of difference in the lives of a good many people. But I guess that's why this policy alternative is not being considered.
---Vitelius
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