Quantitative easing, the method of economic stimulus employed by the Japanese over the last couple of decades and the Federal Reserve for the last several years, has not been particularly effective:

A study published in February found that interest rates decreased, but only for companies with top credit ratings. “Rates that are highly relevant for households and many corporations — mortgage rates and rates on lower-grade corporate bonds — were largely unaffected by the policy,” wrote Arvind Krishnamurthy and Annette Vissing-Jorgensen, both finance professors at Northwestern University.

Another indication of its limited success: Borrowing has not grown significantly, suggesting that corporations — which are sitting on record piles of cash — are not yet seeing opportunities for new investments. Until they do, some economists argue that the Fed is pushing on a string.

“What has it done? It has eased credit conditions, it has pumped up the stock market, it has suppressed the dollar,” said Mickey Levy, Bank of America’s chief economist. “But does the Fed think that buying Treasuries and bloating its balance sheet is really going to create permanent job increases?”

Paul Krugman defends QE as having sent a signal:

What QE2 might have done — and probably did do for a while — is act as a signal of the Fed’s determination to do whatever is necessary,and maybe of a willingness to accept higher inflation. But this only goes so far, especially with all the political pressure on the Fed and its constant declarations, in the face of that pressure, that it remains as steadfast against inflation as ever.

That reminds me of Sam Goldwyn’s wisecrack about “message” movies: “If you want to send a message, use Western Union.” The Federal Reserve already has an impossibly difficult bundle of statutory responsibilities: it’s supposed to regulate banks, control inflation and, produce minimal unemployment. To this we should add sending messages about the economy?

I recognize that expectations are an important part of the economy. Whose job is it to boost expectations? I strongly suspect that in the 1930s most Americans couldn’t have picked the Chairman of the Federal Reserve out of a lineup (Eugene Meyer followed by Eugene Black followed by Marriner Eccles). The job of boosting expectations fell, as it should, to elected officials, particularly the president of the United States. Heard about those fireside chats that Roosevelt gave every few months during his presidency? Their specific intent was to boost the public mood, to give confidence.

Ben Bernanke doesn’t have the training, experience, or temperament to raise the mood of the public during a period of economic uncertainty and anxiety. Expecting him to do so is an abrogation and failure of our political system and doing so by distorting the books of the Fed out of any sane proportions and, coincidentally, making a handful of investors enormously wealthy, is inexcusable.

We need to open a new can of politicians.

Update

Yves Smith’s take on the psychological argument in favor of QE:

You could argue that the big impact of the QEs was psychological, that it was tangible proof that the Bernanke put was the Greenspan put on steroids. And you have thegeneral concern, that the more the Fed meddles in rates, the more it creates economic distortions, which are very likely to be speculation rather than real economy investment.

Of course if you look at the proximate effect of the Fed’s moves over the last several years which is to make hundred of billions of dollars for big banks as a feature rather than a bug maybe everything is going according to plan.

I don’t much care for biblical epics. I think I must have seen every one of them that came out in the 1950s on the big screen (where they belong) from The Robe in 1951 to The Story of Ruth in 1960. I saw Solomon and Sheba the week after Christmas in 1959, about a month after seeing Ben-Hur.

There is one biblical epic you owe it to yourself to see: the 1927 Cecil B. DeMille The King of Kings. Not only does it represent the acme of silent movie making with gorgeous black and white photography and fabulous lighting, it’s probably one of the most influential movies ever made. For an idea of how influential consider this:

Lastly there is Cecil B. DeMille’s “The King of Kings,” the spiritual predecessor to “Jesus.” Its viewership was estimated at over 800 million people by 1959. Because it was produced as a silent film, Protestant and Catholic missionaries alike were able to use it for decades to share the Gospel with non-English-speaking peoples. According to DeMille’s autobiography, during the Korean War Madame Chiang Kai-shek sent an emissary to DeMille seeking a copy of the film to show in P.O.W. camps.

The most powerful story related by DeMille about the influence of “The King of Kings” involved a Polish man named William E. Wallner. Living in Danzig (today Gdansk), Wallner saw “The King of Kings” in 1928. Greatly moved, he decided to devote his life to Christian ministry.

By 1939, Wallner was leading a Lutheran parish in Prague. Shortly after Hitler’s invasion of Czechoslovakia, a doctor in Wallner’s parish was sent to a Nazi concentration camp. Wallner shared with DeMille how the doctor, a Jewish convert to Christianity, encouraged his fellow prisoners “to die bravely, with faith in their hearts.” As a result, the doctor became a target of Gestapo officers.

Although struck with an iron rod until one of his arms had to be amputated, the doctor would not be quieted. Finally, as DeMille’s autobiography recounts, “one Gestapo officer beat the doctor’s head against a stone wall until blood was streaming down his face.” Holding a mirror before the doctor, the Gestapo officer sneered: “Take a look at yourself. Now you look like your Jewish Christ.”

Lifting his remaining hand up, the doctor exclaimed, “Lord [Jesus], never in my life have I received such honor—to resemble You.” Those would be his last words on Earth.

Distraught by the doctor’s proclamation, the Gestapo officer sought out Wallner that night. “Could Pastor Wallner help him, free him from the terrible burden of his guilt?”

After praying with him, Wallner advised, “Perhaps God let you kill that good man to bring you to the foot of the Cross, where you can help others.” The Gestapo officer returned to the concentration camp. And through the aid of Wallner and the Czech underground, he worked to free many Jews over the years that followed.

On July 30, 1957, Wallner met with DeMille and spoke about the impact “The King of Kings” had on his life and all who came in contact with him. Wallner ended his account to DeMille by declaring: “If it were not for ‘The King of Kings,’ I would not be a Lutheran pastor, and 350 Jewish children would have died in the ditches.”

However, there are religious pictures that I like and some that I love. They are mostly small pictures and stories about changing hearts.

So, for example, I think that Lilies of the Field is a brilliant picture. If you’ve never seen it Sidney Poitier plays an itinerant handyman who’s conned by a group of German nuns in the desert of the American Southwest into building a chapel for them. The great thing about the picture is the way it shows the hand of God working in human hearts. At the end of the picture every single person in it has changed for the better.

I love Big Fish. You might not think of it as a religious picture but, indeed, it is. The world is not what you think it is. It is bigger and grander than you can imagine and the stories that the old people told you are true. Not only is it Fellini-esque but I find it very touching.

Speaking of the world being different from what you think it is, I should mention two pictures written and directed by M. Night Shyamalan: Wide Awake and Signs. Wide Awake is a nice little picture you should seek out if you’ve got the chance. It was made just before The Sixth Sense. I know that fifth graders don’t talk the way the main character does at the end of the movie but it’s a great speech anyway.

I’m not sure what I can tell you about Signs. It’s an alien invasion movie. It’s a movie about faith lost and found. I think it’s one of Mel Gibson’s best acting jobs. Right after The Year of Living Dangerously. Signs is corny but, then, I’m pretty corny. I think it would have been better if he had never shown the aliens just as Tourneur’s Mark of the Demon would have been better if they’d never shown the demon (as Tourneur intended—the studio tacked it on). I think that everything that Shyamalan has made since Signs is eminently forgettable but his first three or four pictures should secure him at least a footnote.

Check out Black Narcissus. Like many of Michael Powell’s pictures it’s a pretty scary picture. Not scary as in blood and gore and things that go bump in the night but scary as in the conflicts in human hearts can be pretty frightening. I also love the way that Black Narcissus looks. That glorious,vivid, surreal British Technicolor.

Now that I mention Michael Powell, check out A Matter of Life and Death, one of my favorite pictures of any kind. A religious movie, but not in any conventional sense.

Also Miyazaki’s Spirited Away. Pretty much everything you need to know about Shinto.

And Roberto Benigni’s Life is Beautiful. Probably the movie he’ll be remembered for.

Update

I forgot to mention Jacques Tourneur’s Stars in My Crown. Joel McCrea plays a preacher in the American Southwest in the 19th century. Great cast. Good story. Magnificent scene and speech near the end of the picture.

I’ve got admit that it puzzles me that anybody’s puzzled that the opinion of the American people on the economy is pretty sour:

Americans are more pessimistic about the nation’s economic outlook and overall direction than they have been at any time since President Obama’s first two months in office, when the country was still officially ensnared in the Great Recession, according to the latest New York Times/CBS News poll.

Amid rising gas prices, stubborn unemployment and a cacophonous debate in Washington over the federal government’s ability to meet its future obligations, the poll presents stark evidence that the slow, if unsteady, gains in public confidence earlier this year that a recovery was under way are now all but gone.

I have several ways of gauging the state of the economy all totally anecdotal and non-scientific. I ask my customers. I ask my vendors. Last night I asked the owner of the Chinese restaurant where I picked up my carry-out. He said that business was awful—he’d been in business 50 years in that location and he’d never seen things so slow. I told him I was doing what I could.

I look at the For Sale signs and the cars parked in the parking lots at the mall and how many people are in the Ace Hardware. All of these signs and more show that the economy is persistently slow.

Sure, GDP is growing. It will when you increase federal spending at the rate we have over the last several years. It’s not the sort of thing you can base a robust recovery on.

And manufacturing is up. However, the interpretation I put on the mass layoffs at the start of the Great Recession seems to be proving out. Many companies used the downturn in the economy as an opportunity for getting rid of a lot of employees who didn’t add much to the bottom line, they can produce a lot more product without hiring more people, and they aren’t eager to staff up again. That’s certainly good for the companies but it won’t do a great deal to boost retail or reduce unemployment. And forget housing. There is so much unused and/or unsold inventory in both housing stock and commercial building that we won’t need to build anything for years.

However, the things that people buy are more expensive than they were last year at this time and they’re not getting paid a lot more. For most people that’s inflation whether it meets the technical definition or not.

We’ve got an economy in the doldrums, people are still afraid for their jobs, and prices on what ordinary people actually buy are rising. Is it any wonder that people are discouraged?

The Watcher’s Council has announced its winners for last week. First place in the Council category was Joshuapundit’s The Real Battle In The Middle East: Syria. I’ve got to admit that I find it pretty hard to justify our intervention in Libya without intervening in Syria as well. The Syrian regime is significantly more appalling than the Qaddafi regime (which is saying something) and Damascus openly hosts nearly every major terrorist organization under the sun.

First place in the non-Council category was Zombie/Pajamas Media’s with Tea Party vs. US Uncut: A San Francisco Tax Day Showdown.

You can see the full results here.

Here are the results for the previous week. First place in the Council category was The Noisy Room’s Rumors of Beck’s Demise are Greatly Exaggerated.

First place in the non-Council category was Yid With Lid’s with A Science Fiction Story That Predicted The Manner of Western Suicide. I think he ought to check out Cyril Kornbluth’s The Marching Morons.

You can see the full results here.

Michael Barone does a pretty fair job of explaining why anybody who thinks that we can right our fiscal ship of state solely by increasing the taxes on the incomes of “the rich” are sure to be disappointed:

That’s wrong as a matter of simple arithmetic, as is clear from a chart reproduced on the Wall Street Journal editorial page showing the total amounts of taxable income of each group.

The chart showed that if the government had simply confiscated every dollar from those reporting more than $1 million taxable income in 2008, it would not have gotten the $1.3 trillion needed to close the current federal budget deficit.

What the chart doesn’t show, however, is even more important. And that is that when you reduce income tax rates, high earners have more taxable income. When you raise them, they have less.

High earners don’t sit around waiting to have their money confiscated any more than chickens sit around and let you pluck out all their feathers. They pursue other options.

This is most obvious when you think about capital gains. The federal government doesn’t try to tax capital gains — the increase in values of your stocks or your house — every year (professor Bittker had us in knots explaining how it might do this). You pay capital gains on a stock or house only in the year you sell it.

What happens if the capital gains tax goes up from 15 percent to 50 percent? People stop selling stocks and hold on to their houses if they possibly can. And when cap gains rates go down? They’re more willing to sell, pay the lower tax and invest in something else.

That’s why the government’s total revenues from capital gains have tended to rise when the capital gains tax rate is lowered. And why increases in the capital gains tax rate never raises the amount of revenues static models estimate it will.

Don’t misconstrue my pointing to this as a belief on my part that I support extending the “Bush tax cuts” (I don’t care whether they’re the Bush tax cuts or the Obama tax rates), that I think the government doesn’t need to increase the revenue it produces, or that tax cuts always pay for themselves. As I have said repeatedly year I think it’s practically and politically necessary to balance the budget by a combination of increasing revenues and cutting expenses. The most likely source of increased revenue is from high income earners. Like Willie Sutton I know that you’ve got to go where the money is. And, similarly, cuts must come from where most of the money is being spent: Social Security, defense, and healthcare. The reason we’ve got to do these things however unpleasant or even disastrous we find them is to tamp down a fast-increasing non-discretionary spending item: interest on the debt.

I’m happy to provide my own answer to the question that Mr. Barone asks at the beginning of his column: income is what you report on your 1040.

However, the great debate on taxes is not what the rates should be but how you determine income. Taxing the income of the well-to-do, as suggested above, is risky. They can adjust their incomes in ways that those who depend mostly on W2 income can’t. By the way is there some straightforward way of determining total aggregate W2 wages year by year? I’ve looked and have found the numbers terribly difficult to come by.

If the class warriors were really serious, we’d be hearing more about taxing wealth (did you know that France has a wealth tax?) rather than taxing income. Funny how all those millionaires in both parties in the Senate never seem to raise the subject. If they did I’m sure the screams would be heard from here to Reykjavik.

This morning I’d like to draw your attention to an interactive graphical comparison of the Obama and Ryan budgets courtesy of Mish Shedlock:

The formatting of the embedded code is goofy and it took a refresh or two for me to get it.

To my eye more than anything else this shows how much the bitter political debates in this country resemble nothing so much, as I believe George Will put it, as a football game played between the forty yard lines.

Note that neither budget does much to halt the inexorable and unsupportable growth in government spending. My interpretation of that is that both assume levels of private sector growth that are not apparent now (as I noted yesterday) and for which neither plan introduces a mechanism that might produce such growth. Either they’re just assuming some magical rate of growth or they’re ignoring the disastrous effects that rising government spending in the face of a stagnant private sector economy will have.

This morning my wife and I were reminiscing about commercial flying. Forty years ago ordinary tourist class flying was a pleasant experience. Flight attendants, invariably young, attractive women in highly tailored uniforms, were unfailingly courteous and at least appeared to be genuinely concerned for your well-being and grateful for your business. Seats were far enough apart that you could rise, turn, and cross in front of adjoining passengers without disturbing them or jostling them or, in some cases, rousing them from their slumber. Flights tended to be on time.

Most passengers were travelling for business. Most people dressed to travel, beyond what would be considered business casual today.

Flash forward forty years. Flying first class today is roughly what flying tourist was then. Flying tourist today is more like riding the Greyhound Bus.

In the spirit of my last post.

Yesterday I completed the federal and state tax returns for my mother’s estate and for her trust. Considering the pittance that I earn I spend an enormous amount of time keeping records and filling out forms.

Hiring an accountant won’t do anything for me. I’ll still need to do all the record keeping and that’s the bulk of the work. It’s emotional rather than rational but there are times when I feel as though I’m a full time unpaid employee of the governmentl.