Is this chart a symptom of insanity? We have real growth and bond buying on the same chart. The Fed is the primary purchaser of government bonds, the red line. So government has much more access to liquidity than any other friggin sector of the economy. What has government managed to do? Absolutely nothing, look at the resulting GDP growth, the grey line.
Why are we doing this? The explanation is the theory of things that never happened. For some reason, something worse then near zero growth should have happened to us if the Fed did not allow Congress to expand spending. What didn't happen? Well, for one thing, the federal government never shut down its loss making enterprises, like NCLB or the worthless transit systems. As long as the Fed lets Congress lose money, real growth will be near zero and we will oscillate.
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