“Thanks to monetary policy, we could have missed our inflation and unemployment targets even more completely than we already have!”
Posts Tagged ‘Fed’
The deficit’s shrinking, the polarization in DC means nothing much will be done on anything for the next 4 years, the banks and corporations are sitting on huge piles of cash, and inflation remains well below the Fed’s recently announced 2 1/2% target.
Gorilla asks: “So why is the Fed still doing so little about unemployment, a problem it could solve by giving people free money?”
If you’re stuck on, or rather below, an utterly stupid 2% inflation target, while the political classes abdicate responsibility for the the fiscal side, then you’re not fulfilling the dual mandate!
High unemployment and low inflation is an absolute disaster for this country. What’s needed is a clear statement: 5% inflation will be tolerated until unemployment falls below 6%.
Gorilla says: “The thumbs are increasingly thumbscrews, as applied by the Fed!”
Ben Bernanke has at last gotten off his ass and announced a more or less unlimited QE3.
Time to cheer?
Well, yes and no.
What was missing today is a clear statement that the Fed will allow inflation to rise even after an economic recovery is in place. And that rise in inflation should be linked explicitly to a fall in unemployment: Gorilla would like to see 5% inflation until unemployment falls to 6% or less.
Giving money to all Americans freely might be more efficient than providing it to our very corrupt financial system. The banks have stockpiled huge amounts of cash already, they’re still deleveraging, and the demand that would spark lending remains woefully inadequate.
Free money in everyone’s pocket would greatly assist in getting demand, and therefore GDP growth, back to the trend line. It would also make a huge dent in what should be unacceptably high levels of unemployment.
Bernanke’s history has been to be too late and too conservative. Unlimited QE3 says he understands that the Fed can do a lot more than it has so far.
Gorilla says: “A bit of straight talk would be welcome, but at least they’re putting money where there mouth isn’t!”
Gorilla’s been under the weather this week, but he clearly hasn’t missed much.
First up, the Know Nothing convention. When racist, misogynistic liars gather, there’s no news, just amoral, cowardly bullshit. One speech after another filled with lies is what it is: desperation coupled with hatred. Didn’t work for the Nazis, won’t work for the Know Nothings.
Next up, the Fed Chairman, who’s long on words, short on actions, and just as amoral as the bunch gathering in Tampa. There’s zero inflation and high unemployment, and the Fed, as it has for the past decade, is failing completely to support the dual mandate. Goosing asset prices and fighting non-existent inflation, while millions suffer for no reason, is not a serious economic policy.
Gorilla says: “It’s all about the accountability free era we live in: You can’t have a failure of leadership when you have no leaders!”
Inflation’s running well below the Fed’s 2% inflation target, while unemployment remains above 8% and the Fed continues to do nothing.
What’s needed is QE3 for you and me: lots of money provided directly to Americans. The Fed could buy up and refinance all the mortgages in the country. The Fed could send a check for $10,000 to every American. The Fed could announce a much higher inflation target (5% would be about right) that will be pursued until unemployment drops below 7%.
But the Fed does nothing, primarily because its notion of independence means it can’t get too involved in helping the US economy during an election year.
Such an approach is what it is: cowardly and amoral.
Gorilla says: “Stupid or evil, it makes no difference, the Fed is a disaster!”
It’s what amoral shits like Ben Bernanke do!
Economic growth remains woeful, certainly insufficient to provide jobs just to keep up with population growth…
Better that millions remain unemployed, losing their homes and their health insurance, than do anything to raise inflationary expectations above 2%!
It’s an absolutely shameful policy failure from the second worst Fed Chairman of all time, a man so accustomed to failing that no one can be surprised any more.
Gorilla says: “Instead of worrying about the moron at FHFA, why not ask the Fed Chairman to resign?”
The Congress is dysfunctional and it’s an election year, so it’s up to the Fed Chairman to do something about the disastrous unemployment situation.
Bernanke frankly would make things easier on everyone by resigning, he’s been wrong so often about everything economic that it’s difficult to see why his continued incompetence should be rewarded.
On the other hand, he could save what’s left of his reputation through a one sentence public statement:
“The Federal Reserve is raising its inflation target to 5%, where it will remain until unemployment drops below 7%.”
Or he could decide at last to be Helicopter Ben for someone other than rich bankers, by issuing a check for $5,000 to every American over age 21, which would begin to narrow the output gap.
Gorilla says: “Long past time for the Fed Chairman to be independent, not pretend to be!”
Unemployment claims: back to 370K, the economy’s not growing fast enough, of course!
Meanwhile, the Fed continues to do absolutely nothing. Having no credibility whatever on unemployment is apparently less important than having credibility on non-existent inflation.
What’s needed is what’s never offered: a very large scale stimulus (at least $2 trillion) that focuses solely on hiring the unemployed.
Gorilla says: “Long past time to turn the Fed district hqs into job centers!”
The Fed once again dicks around!
Another round of quantitative easing would be just dandy, as is the decision to leave interest rates alone for another 2 plus years.
But this is small beer in an economy growing very slowly with high unemployment, low demand and a huge output gap.
What’s not on offer is what the Bank of Japan is doing: raising the inflation rate target.
The BOJ’s new initiative, first recommended years ago by a couple of Princeton economists called Krugman and Bernanke, is explicitly raising inflation expectations from 0 to 1%, not exactly wildly courageous (an inflation target of at least 5% is what Japan needs desperately after more than a decade of deflation) but unprecedented in the history of central banking.
It’s a very big deal that the media is missing completely.
At the moment, the Fed’s inflation target is a ridiculously low 2%.
A target of 4-5% is what’s needed, along with a clear statement that inflation expectations will be allowed to go even higher until unemployment drops below 7%. It’s clear that nothing much will be done about increasing demand on the fiscal side in an election year.
Gorilla says: “If only Ben Bernanke would become Ben Bernanke again!”