The Fed Finally Does Something About Unemployment. And It’s Big.
http://swampland.time.com/2012/12/12/the-fed-finally-does-something-about-unemployment-and-its-big/?iid=sl-main-leadThe Fed Finally Does Something About Unemployment. And It’s Big.
By Michael Grunwald
Dec. 12, 2012
Wow. I’ve been a broken record about America’s stay-the-course monetary policy, about the Fed failing to fulfill its mandate to maximize employment at a time of rampant joblessness, about Ben Bernanke channeling Jerry Seinfeld and basically doing nothing while Congress was doing less than nothing. Well, Bernanke and the Fed did something Wednesday. They did something big.
The technical details are pretty dull. The Fed announced that it intends to keep its key interest rate at zero until unemployment drops to 6.5%, the first time it’s ever set a target for employment. It also signaled that it will tolerate inflation as high as 2.5%, above its stated goal of 2%. And it extended its “QE3” bond-buying program to hold down long-term interest rates. What it means is that Bernanke and his fellow inflation doves have won their argument with the hawks, and the Fed is stepping on the accelerator instead of riding the brakes. After three years of doing a wonderful job of maintaining stable prices while doing a terrible job of maximizing employment, the Fed finally seems determined to take its dual mandate seriously. As Bernanke admitted in his press conference, the Fed has consistently overestimated the pace of growth since the recovery began in 2009.
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It would have been nice if Bernanke had picked up the slack sooner. Maybe he feared the political consequences of juicing the economy before the election; Governor Rick Perry had warned that “we would treat him pretty ugly down in Texas” if he tried another round of monetary stimulus. Maybe some of his hawkish colleagues who had been fighting for tighter policies came around to his side after their predictions stubbornly failed to come true; to his credit, Narayana Kocherlakota of the Minneapolis Fed changed his views after seeing more data. Maybe Bernanke just figured that enough was enough, that it shouldn’t require a global economic meltdown to get the Fed to do creative things, that it was time to re-adopt the whatever-it-takes attitude that made him Person of the Year in 2009.
There will be more to say about what these new targets mean for the Fed. But for now, they should help the economy—or at least prevent cliff-diving politicians from harming the economy as much as they might like.
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This just means that we'll have near zero percent for long-term (i.e. mortgage term) loans. That will help housing a little, but not much. Anybody who was well qualified and really wanted to buy a home would already have done so. This is not going to bring in millions of buyers. What it will do is start to form the next bubble.
And here is how the market reacted to it:
Please note that the past 6 trading days were all positive -- a nice run up. The Market hit a brick wall when they saw this from the Fed. It is absolutely toothless, and just points out the fact that the Fed has already used up all its ammo.
We need to stop with the financial trickery and do what we know works: infrastructure projects and other projects that will hire people and get their paychecks circulating in the economy.
Yeah, continuing to prop up the bond market at taxpayer expense while maintaining the fiction of solvency is really going to turn things around for Main Street.
The illusion of solvency is a completely different part of the Great Con Job. Keep on spinning and trying to convince someone that you have a clue...
(here's a hint; Cutting and pasting what you find on sites which appear to agree with your take is not equivalent to knowledge)
You're a parody of the guy you're trying to project/pretend that you are. And how is it that you know so much about what "teabagging idiots" are saying on what I can only assume is some Reich-wing, gold-bug website?
or take your pick.
