Few benefits from Fed stimulus
Image via WikipediaNY Times:
The Federal Reserve’s experimental effort to spur a recovery by purchasing vast quantities of federal debt has pumped up the stock market, reduced the cost of American exports and allowed companies to borrow money at lower interest rates.One of the defining characteristics of this recession is the failure of liberal economics. Liberalism just has not worked and it has put a crushing burden of debt on the country. Obama's stimulus spending did not do what it was advertised to do and Bernanke's has had little impact on those with fixed incomes. To the extent it has had an impact, it has been negative. While the fed does not include fuel and groceries in its calculation of inflation, the fact is that those on Social Security have seen their income diminished by his action which has caused inflation in commodities.
But most Americans are not feeling the difference, in part because those benefits have been surprisingly small. The latest estimates from economists, in fact, suggest that the pace of recovery from the global financial crisis has flagged since November, when the Fed started buying $600 billion in Treasury securities to push private dollars into investments that create jobs.
“It’s good for stopping the fall, but for actually turning things around and driving the recovery, I just don’t think monetary policy has that power,” said Mark Thoma, a professor of economics at the University of Oregon, referring specifically to the bond-buying program.
Mr. Bernanke and his supporters say that the purchases have improved economic conditions, all but erasing fears of deflation, a pattern of falling prices that can delay purchases and stall growth. Inflation, which is beneficial in moderation, has climbed closer to healthy levels since the Fed started buying bonds.
“These actions had the expected effects on markets and are thereby providing significant support to job creation and the economy,” Mr. Bernanke said in a February speech, an argument he has repeated frequently.
But growth remains slow, jobs remain scarce, and with the debt purchases scheduled to end in June, the Fed must now decide what comes next.
It has become a backdoor means of diminishing the value of Social Security and retirement benefits without having to deal with COLAs. And, it has been a failure at its stated purpose of increasing economic activity and jobs.
Unfortunately, we have a President who still believes in liberalism so he is pushing more federal spending and more federal taxation. One of the lessons over the last 30 years is that you are more likely to achieve growth in the economy and in jobs by keeping the tax burden low on the job creators and keeping spending low so the government is not competing with the private sector for funds. The main reason liberals do not like this approach is that it does not fit their control freak mentality when it comes to government and regulation.
Update: Sarah Palin nailed the problem well before the rest of the country noticed.