The Federal Reserve's quantitative easing program, or QE2, is set to wrap up in June and right now no one knows if another round of easing is in the works as the U.S. economy shows signs of meaningful improvement. But New York Times blogger Paul Krugman has a few interesting thoughts on the success of QE2 and whether the economic recovery is in a self-sustaining phase.
He argues that QE2 stimulated consumption and net exports - driven largely by a lower U.S. dollar and a thriving stock market.
"If QE really is working through stocks and the dollar, are there further implications?" he said. "I'm not sure - in a highly indebted society, you might hesitate at policies that would increase private debt further, but if stocks are driving the story, the consumers now spending more aren't the same people who are in debt trouble - so that's actually OK. And as for the weaker dollar, if the Chinese and the Brazilians don't like it, they are free to let their currencies appreciate.
"I would say that if it's right, it's far from clear that the recovery will prove self-sustaining."
His comments come after the U.S. Labor Department released on Friday a better-than-expected report on payrolls numbers for March, which investors had initially interpreted as a signal that the Fed was about to get more hawkish on economic stimulus.
However, that interpretation quickly changed after Federal Reserve Bank of New York President William Dudley warned that the economic recovery is still in its early stages, and expressed the need for ongoing easy monetary policy.