Those who express this view believe that the Fed has been providing the economy with extraordinary monetary stimulus since 2008. I can only ask that they look at the actual data, which show that money growth since the Crash has averaged in the mid-single digits, which is less than money growth in previous recoveries. The economy has received no “artificial stimulus”. The Fed’s futile machinations with QE1, QE2 and QE3 have failed to produce rapid monetary growth. Since 2008, the economy has not been on stimulants, it has been starved for oxygen.
I think this point bears emphasis: the modest recovery in economic growth and employment experienced since the Crash has not been accompanied by rapid money growth. I have to keep repeating this because it just doesn't seem to sink in. The economy hasn't been on cocaine; it's been on aspirin. There is no dangerous drug for the economy to get off of.
The monetary transmission vector is broken because the linkage between the Fed's balance sheet and the money supply (the money multiplier) has been severed (or never existed). To analogize: the Fed's foot is on the accelerator; the tachometer reads 5000 RPM; but the car is in neutral and the speedometer reads zero. It’s not the motor that’s broken; it’s the transmission. Excess reserves at the Fed are not translating into bank deposits held by the public.