This is the Cato Daily Podcast for Wednesday, December 8th, 2010.

I'm Caleb Brown.

The expansion of the money supply once again is aimed at jump-starting the economy, but can what's holding back the economy

be helped by an infusion of $600 billion.

Cato Institute Senior Fellow William Poole says the economy is performing poorly because of new regulatory shocks, right about

by the new health care law and financial reform law. Pool is the former head of the Federal Reserve

Bank of St. Louis, we spoke during Cato's Monetary Conference in November.

QE1, what's now called QE1, involves a very large expansion of the Fed's

balance sheet that really began right after the failure of Lehman and the bailout of AIG.

And the Federal Reserve rapidly expanded its assets. It started, for example, with the infusion of cash simply

to keep AIG afloat. So between the, let's say the 1st of September and the end of December, the Federal Reserve's balance sheet more than doubled, a little bit more than doubled.

At the time, Chairman Bernanke called it not quantitative easing, but

credit easing because the idea was to send credit to sectors of the economy that were being denied credit that needed credit and

were just if had that need justified but the market had cut down because of the tremendous fear sweeping across the markets.

So at the time he called it quantitative easing, but everybody now seems to treat it as QE1, quantitative easing, example one.

Now we're in quantitative easing example two, or case two, and the question is whether this was a wise thing for the Federal

Reserve to do. The origin of it is that employment growth has been very slow.

The official trough for the recession, the bottom, the end of the

contraction was June of last year and yet employment didn't start to grow very much I guess until the beginning

of this year and the growth has been quite modest in the meantime.

So the Federal Reserve given its responsibility under the law, believed that it needed to have a little more push, ump added to its monetary policy actions.

And this is really the only thing it had available to it.

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