In the previous post, our reader ILoveCapitalism details the pitfalls of the Federal Reserve’s policy of “quantitative easing”. Other economists and pundits have wondered about its political implications, including the Weekly Standard’s William Kristol who called the move “a foolish step, but one that’s also a remarkable acknowledgment of the ineffectiveness of three and a half years of Obama economic policies.”
He’s not the only one to note how President Obama’s ostensible economic ally Federal Reserve Chairman Ben Bernanke just gave Mitt Romney, in the words of the American Enterprise Institute’s James Pethokoukis, a “huge gift“. He imagines Romney saying that the federal reserve chief. . .
. . . finally admitted what most folks outside Washington already knew: The economy, three years into a supposed recovery, remains in terrible shape and is unlikely to get much better anytime soon.
In fact, Bernanke said there’s such little hope for improvement that he and the Fed are going to embark on a radical new experiment in money printing in order to try and do something, anything, to boost growth and create jobs.
In short, the Fed chairman’s move clearly suggested Obamanomics isn’t working today and is unlikely to work any better tomorrow. We cannot stay the course. And since Washington won’t act, he will.
Listing a series of actions the government could have taken (but instead rejected) to stimulate growth, entrepreneur Jeff Carter calls the Fed’s move “kicking the can down the road until the economy improves” and reminds us that Japan tried a similar move, but it didn’t work.
Let us hope Mitt Romney responds to this move as Petothoukis suggests, noting Bernanke’s acknowledgement that Obama’a plans aren’t working (else why would we need QE3) and detailing his plans to get the economy going again. He would do well to cite programs the Obama Democrats rejected (especially those Carter details).
The Romney/liquidationist view only makes sense if you believe that the problem with our economy lies on the supply side – that workers lack the incentive to work, or are stuck with the wrong skills, or something. And that’s just not what the evidence says; instead, it points overwhelmingly to an insufficient overall level of demand.
When dealing with ordinary, garden-variety recessions, we deal with inadequate demand through conventional monetary policy, namely by cutting short-term interest rates. Until recently even Republicans were OK with this.
Now we face a more severe slump, probably driven by deleveraging, in which even a zero rate isn’t low enough, so monetary policy has to work in unconventional ways – in particular, by changing expectations about future inflation, so as to reduce real interest rates. This is no more “artificial” than conventional monetary policy – harder, yes, but it’s still about trying to get the market rate aligned with the “natural” rate consistent with full employment.
So where are Romney and his party coming from? Basically, they’ve thrown out 80 years of economic analysis and evidence because it doesn’t fit their ideological preconceptions, and they’re resorting to dubious metaphors – “sugar high” and all that – as a substitute for clear thinking.
So you’re telling us that Weimar Republic monetary policy will work this time, Passing By? Is that it? I would LOVE to sell you a wheelbarrow. You’re gonna need it filled to the brim with U.S. fiat money to buy a loaf of bread in the not-too-distant future if we don’t manage to evict the current occupant of the White House in November.
Dear G-d. I didn’t know they could pile stupid as tall as you are.
Passing By…There are these things made out of paper that you can read. They are called BOOKS. You should look into the BOOKS that are known as history BOOKS. There are also BOOKS known as Economic BOOKS that will teach you about ECONOMICS. Read a BOOK before you post again. Oh, and before you post again…have your mother proofread what you wrote before you hit ENTER.
If we’re recommending books, I have several in mind, how about you Lobogris?
“Economics in One Lesson,” by Henry Hazlitt.
“The Law,” by my hero, Frederic Bastiat.
“Basic Economics: A Common Sense Guide to the Economy,” by Thomas Sowell.
“Man, Economy, and State Man, Economy, and State,” Murray Rothbard.
I’d recommend “Human Action,” by Ludwig von Mises, but I suspect it’s out of “Passing Bys” intellectual reach. And I don’t mean to be a jerk by saying that; it’s a VERY difficult read.
Oops..sorry for the typo in the title of Murray Rothbard’s book.
Sorry, Passing By, it’s not Romney et al who have thrown our 80 years of economic analysis and evidence, but Barack Obama and the Democrats. The type of Keynesian “stimulus” they put into place had never previously worked.
The New Deal did not lift us out of the Great Depression. They call the 1990s in Japan the “Lost Decade” for a reason.
The economy boomed in the 1980s and 1990s despite Ronald Reagan’s failure to promote a “stimulus” and Bill Clinton’s failure to get his through the Senate (thank you, Bob Dole, for filibustering it).
And sorry, you’re going to have to do better than citing Paul Krugman, a man who was once a fine economist, but has recently become merely an anti-Republican attack dog. In this century, to paraphrase an unnamed blogger, he predicted seven of the last one recessions.
Passing By : there is a reason they call it QE3.
Now, the basic premise behind QE is to stimulate the housing market., creating another bubble.
Haven’t the liberals been screaming and hollering over the “failed” policies of the Bush admin? A housing bubble is a bubble no matter the reason for the bubble.
The only conclusion we can make from Passing By’s post :
Economic bubble under a D POTUS = good, an economic bubble under an R POTUS = evil.
Imagine that.
As for your supply/demand statement. Demand will only happen in a confident market. Business is not confident, consumers are not confident. Obama and his regulation squad have caused the uncertainty. ACA, Dodd-Frank regulations are still being written.
This is what I tell all liberals who think Obama has created a wonderful environment for demand : Start a company, employ hundreds of union workers, adhere to ALL the government regulations, provide everyone with 4 weeks of vacation, provide annual salaries for everyone that are no lower than the median wage for your state, provide 100% health care coverage for all employees (partners, spouses and children), provide on-site free daycare, use only renewable energy in fully self sustaining facilities and donate all profits over a 5% profit margin to the government.
This is the only way to create demand. I am not sure why liberals all over the country are not following this plan. After all, Obama has told us people who run businesses don’t have to be smart or hard working. Why are these non-entrepreneurs so unpatriotic?
Now, Passing By, please post a link to the website of your successful business enterprise. Best of luck.
P-B, I have another book to recommend to you:
“Atlas Shrugged” by Ayn Rand.
Regards,
Peter H.
I recommend:
¨Free To Choose¨ by Milton and Rose Friedman and
¨Creative Mind and Success¨ by Dr. Ernest Holmes