This is the Cato Daily Podcast for Thursday, June 9th, 2011. I'm Caleb Brown. Are you ready

for another round of quantitative easing? The Federal Reserve's efforts at propping up housing

in other markets and trying to push down

unemployment have thus far been unsuccessful. Jim Dorne, Academic Vice President at

the Cato Institute and editor of Cato Journal, argues that until we let prices settle down, uncertainty will prevail in the economy.

The Fed's engaged in quantitative easing now for about two years, and it's expanded its balance sheet by about two trillion dollars.

That means that the monetary base, the currency plus reserves, is expanded by about two trillion

dollars in that shorter period of time. But yet the unemployment rate

is still around 9% or more and the economy has slowed in the first quarter this year to

less than 2%.

So they're talking about putting more fuel on the fire

with a quantitative easing 3.

Now Bernanke hasn't supported that yet, but there's talk that

uh... they move may move in that direction uh... to try to quote stimulate the

economy

uh... at this point But Bernanke just called the idea that you can use

monetary policy to stimulate the economy at this point in time a panacea. It's no panacea. He said it's no panacea to try to use monetary policy in this

type of climate. By what she means that the Fed can't really affect real variables like employment by simply printing money.

We've known that for decades, but the Fed doesn't seem to understand it.

And hopefully, they will say, okay, quantitative three is going to be a huge mistake and

we can't solve all the economy's problems by simply printing more money. In fact it's going to create even

larger problems in the future. So when they say we want to stimulate the

...