The NGDP consequences of the Fed´s “dirty little secret”

David Beckworth has a post where he shows this chart

Dirty Secret_1

And concludes:

By  now you have probably noticed an inherent tension between these two underappreciated facts. On the one hand, the Fed never intended the expansion of the monetary base under the QE programs to be permanent. On the other hand, the monetary base injections needed to be permanent for the QE programs to really spur aggregate demand growth. And therein lies the Fed’s dirty little secret: the Fed’s QE programs were muted from the beginning. They never could on their own create the amount of catch-up aggregate demand growth needed to restore full employment. So despite all the Fed has said over the past six years, it made an explicit policy choice to avoid fully restoring aggregate nominal expenditures.

The Fed, in short, never chose to unload both barrels of its gun. And the QE barrel that it did unload depended on a portfolio channel that could only promise modest benefits at best. Had it committed to a permanent expansion of the monetary base via a level target, the Fed would have unloaded both barrels of its guns and made the QE programs far more effective.  Instead, the Fed opted for bird shot when it could have used a slug. This is the dirty little secret Fed officials would rather leave unsaid.

And it´s all very consistent with the outcome for NGDP, which is rising at a level far below where it should be if the Fed had committed to a permanent expansion of the monetary base via a (NGDP) level target!

Dirty Secret_2

Also, employment remains far below where it could be!

Dirty Secret_3

The upshot of all this is that you can ignore Yellen´s demonstrations of worries about the plight of the unemployed. The Fed has the economy EXACTLY where it wants it to be!

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