The conservative case for quantitative easing

So how does QE2 promote conservative principles? It does so by reducing the likelihood of further government spending on the economy. Currently, there are important structural adjustments occurring in the economy such as the retooling of workers and the deleveraging of debtor households. These adjustments would be easier and in some cases expedited if QE2 were successful in spurring economic growth. Workers, for example, would have greater opportunities to retool — on-the-job training, higher income, more educational and employment options — and debtors would have both higher incomes to support their debt repayment and lower real debt burdens. Obviously, QE2 would also address the weak-demand problem, which would further shore up employment and income growth. By supporting such a market-based recovery, QE2 would eliminate the need for further fiscal stimulus. Programs like extended unemployment benefits would disappear, and budget deficits would be harder to justify. The federal government would be put on a more solid path to fiscal solvency.

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