Well, that’s what some think we should be declaring. According to Paul Krugman QE is already working:
For almost fifteen years, some of us have argued that central banks can gain traction even in a liquidity trap if they can create expectations that money will remain loose after the economy recovers, generating modestly higher inflation. And that’s what the Fed’s new tack is supposed to achieve.
The right headline on that FT article should have been “QE3 working so far”.
It’s strange to me how so many economists take moves in markets in real-time to mean that certain policies are “working”. Secondary markets are a reflection of future expectations. They’re essentially the summation of the guesses of a bunch of evolved apes sitting in front of computers who think they can predict the future. These apes are inordinately ill-prepared to deal with the realities of the market place and their irrational and rather poorly evolved brains don’t efficiently digest all the enormous amount of information necessary to make prudent decisions. But as soon as a few million of these apes settle their trades at the end of the day we just go and assume that the prices are all efficient and accurately reflect the future fundamentals of the assets being exchanged. Of course, then these same apes wake up less than 12 hours later and sit in front of the same computers often times claiming the world has dramatically changed from just a few hours earlier!
If you ask this ape, that doesn’t make a whole lot of sense. So to assume that QE3 is “working so far” is the same as assuming that the apes who pressed a bunch of buttons last week at the NYSE were all making prudent, well informed, rational and predictive decisions. Of course, we saw many declare that QE2 had “worked” right after it was implemented. That worked out well. So well that we needed Operation Twist and now QE3. It’s like we have doctors working on our economic patient who just keep saying “don’t worry sir, THIS TIME the operation will be a success”.