I have long observed that any students who pass Econ 201 and Econ 202 with good grades and then remember what they learned are far and away more knowledgeable about economics than the majority of Congress. Now I must add “far more knowledgeable than the nation’s leading(?) newspaper editors.” Observe the Washington Post in an editorial, November 21:
Yet buying hundreds of billions of dollars worth of federal debt in a deliberate effort to lower long-term interest rates and boost employment looks to many economists, market participants and politicians like fiscal policy by another name. And fiscal policy is an inherently political business.
Buying bonds as The Federal Reserve is doing with it’s QE2 program is monetary policy. It is most assuredly NOT FISCAL POLICY. That is by definition. Fiscal policy is the changing of government spending and taxation (the budget) for purposes of achieving macroeconomic goals. The Federal Reserve Bank is not the government. The Federal Reserve bank when it buys bonds and pays for them by increasing bank reserves is engaging monetary policy. The two are different. Even a casual investigation of any Principles of Econ text will note the difference. Heck, skip the text book and look it up in Wikipedia at fiscal policy and monetary policy! Such ignorance on the part of a major newspaper is appalling. No wonder they’re losing market share.