The studies he cited were primarily by Fed economists. One, by Hess Chung and several others, was published in an external peer–reviewed journal—and please stay with me for a couple of paragraphs here.
That study said the Fed’s first round of quantitative easing in 2009 probably lowered long–term bond yields by 50 basis points, or half a percentage point, suggesting that “private payroll employment is currently 1.8 million higher, and the unemployment rate three–quarters of a percentage point lower, than would otherwise be the case,” the authors wrote.
Two economists at the Boston Fed, Jeffrey Fuhrer and Giovanni Olivei, said that QE2, which ran from late 2010 through mid–2011, could “be expected to raise real GDP by 60–90 basis points.” That “implies a decline in the unemployment rate of 30–45 basis points” or “an increase of about 700,000 jobs,” they concluded.
So there you have it: A $2 trillion increase in the Fed’s balance sheet may have gotten you roughly 2.5 million jobs, about what several outside economists say the Obama administration’s stimulus plan saved or created.
It also was close to the 2 million jobs I estimated the Bush tax cuts may have helped create in the mid–2000s.
Who can claim any of these was a big success?
And that’s the problem. Three big policy initiatives based on three different economic philosophies all have failed to spur employment in the past decade.
“I don’t think what the Fed has done has had a huge impact,” said James Hamilton, an economics professor at UC San Diego. “I think the steps they took have helped prevent the situation from getting much worse.”
“I’m among those who think the Fed should be a little cautious and humble about what they can do. I don’t think the Fed can solve all the problems.”
Ben Bernanke might agree. In his Indianapolis speech this week, he said: “Monetary policy is no panacea.” That’s true for supply–side tax cuts and Keynesian stimulus as well. These policies may have prevented the very worst—another Great Depression—but they still haven’t produced a good recovery.
Keep that in mind when you listen to presidential candidates push ideas that in recent years just haven’t delivered the goods.Howard R. Gold is editor at large for MoneyShow.com and a columnist at MarketWatch. Follow him on Twitter @howardrgold and read his coverage of the economy and the 2012 presidential election at www.independentagenda.com