Software entrepreneur Louis Woodhill doesn’t think so. He explains why within the pages of the latest Forbes magazine.
[I]n late 2007, a severe economic contraction began that economists did not see coming and did not know what to do about after it arrived. This period of economic distress has lasted almost six years to date. Let’s call it “The Pretty Good Depression.”
Let’s be blunt. Whatever economics is, it is not a science. Unlike physicists, who can predict an asteroid’s closest approach to earth within a few miles when it is still 100 million miles out in space, economists can’t accurately predict this quarter’s GDP. Indeed, they are still arguing among themselves about what “really” happened 83 years ago.
In light of the economics profession’s track record, it is hilarious to hear pundits and politicians say things like, “Most economists agree…” as if this mattered. …
… QE3 was supposed to increase GDP growth, accelerate job creation, and reduce long-term interest rates. At the time, economists like Paul Krugman were also cheering from the sidelines for higher inflation, which is usually accompanied by rising gold prices.
So, what happened during the first three calendar quarters of QE3?
Well, the monetary base expanded by $698.1 billion. Despite this massive monetary stimulus, NGDP growth fell to 2.27%, RGDP expansion slowed to a crawl, at 0.99%, inflation fell to 1.28%, and the economy added fewer FTE jobs, only 1.3 million of them. At the same time, ten-year treasury interest rates shot up to 2.30% and gold prices plummeted, falling $448.90/oz.
In other words, QE3 had exactly the opposite effects of those intended. So, what was the Fed’s response to this data? They announced that they will “stay the course” until the economy improves!
How can the Fed ignore the evidence right in front of its collective face? Apparently, it does the same thing that the Keynesians do when confronted with evidence that “fiscal stimulus” doesn’t work. They fall back on econometric models that “prove” that their favored policies work via calculations that assume that those policies work.
Specifically, the economists take the actual results for a period and back calculate what the numbers would have been absent the fiscal or monetary stimulus. Since the computation of this “counterfactual” is done with a model that assumes that the policy works as advertised, the calculations always “prove” that the policy was effective.
Warning: Don’t try this at home. In the private sector, results matter, and you will go broke if you keep doing stuff that doesn’t work.
