Tim Price: If QE were a disease, it would be one caused by the doctors themselves

Perhaps the most powerful metaphor in the dismal history of economics is Frédéric Bastiat's broken window fallacy. It runs as follows. A shopkeeper's son accidentally breaks one of his windows. It attracts a crowd. Pretty soon the crowd concludes, "It's an ill wind that blows nobody any good. People need to earn a living. This will be good news for the glazier." The glazier duly arrives and is paid six francs for his repairs. The crowd now ‘develops' its thinking: "Money will now circulate through the economy. Perhaps we should break more windows." "Stop!" cries Bastiat, addressing th...