Why Is the Economy Not Taking-Off?

Abstract

Since the outbreak of the crisis in September 2008, the Fed has finished two rounds of quantitative expansion and launched the QE 3 in September 2012. It has added $1.9 trillion to money supply over 3 years and will inject $400 billion more over a year. Money supply, M2, has gone up from $7.4 trillion in January 2008 to $10 ­trillion in August 2012, i.e., by 35% over four and half years and average annual growth of 7.8%. Over the earlier decade 1998–2008, the M2 grew from $4.4 to $7.4 trillion, at the average annual growth of 7%. The roaring 1990s saw M2 rising from $3.2 to $4.6 trillion, a lower average annual growth of 4.4%.