How even the nostrums of decades of accepted mainstream academic economics are debased by propaganda in these latter days!
As John Hussman has pointed out, the euphoria of the current expansion (among the haves) is largely due to the legerdemain of FAS 157, the "pretend and extend" statement.
But FAS 157 was not enough.
Graduate students have been taught for decades that excess reserves are just that, in excess of required reserves, and therefore do not contribute to money multiplier money creation, or to movement of the real economy.
So "quantitative easing" (taking bank assets into the Fed and letting them serve as reserves) when it involves adding to already excessive levels of reserves should not expected to have an effect on the real economy. And it hasn't, by definition.
So why do it? The reason for QE is simply to sweep the mountains of bad debt on the banks' balance sheets into the unauditable fetid swamp that is the "Federal" Reserve System. It is "quantitative erasing" of these bad debts and magical transmutation of them into the gold (for the bankers) of high-powered reserves, so that the bonuses may increase!
The Fed has never to my knowledge reported on the losses on the assets it holds.
So I gag when I hear that Fed policy is going to remain "accommodative." It is a measure of the level of false consciousness even among supposedly professional economists that no one is calling out the Fed on this canard. ZIRP is so far from being repealed (see Hussman's beautiful chart relating reserves as a percent of GDP to short rates a couple of posts ago) that the dreaded "taper" can a priori have no effect on short rates; the only effect might be lower long-term inflation expectations, which would flatten the yield curve, which would be bearish for the economy, other things equal.
So I just think of QE as "quantitative erasing" and further plunging into the monetary chaos to come.
The banking system remains an anvil around the neck of the American economy. The Fed needs radical reform, or better, to be abolished.
And when the crisis comes, I pray that the haves in America will rediscover a collective conscience and realize that the countrymen and women they have expropriated are their closest relatives.