Even Ben Bernanke is having a hard time justifying this latest round of monetary easing, but it isn't as if other fiscal philosophies have been any more successful in recent years, writes MoneyShow's Howard R. Gold, also of The Independent Agenda.
When Federal Reserve chairman Ben Bernanke announced a new round of unconventional monetary stimulus last month, he couched it in the language of grim necessity, saying:
“The employment situation…remains a grave concern…Fewer than half of the 8 million jobs lost in the recession have been restored…5 million Americans have been unemployed for more than six months, and millions more have left the labor force—many of them doubtless because they have given up on finding suitable work.”
That was the rationale for an aggressive new effort to buy $40 billion worth of long–term mortgage–backed securities per month until…well, who knows?
And the chairman said the Fed would keep the federal funds rate—now at 0.25%—at “exceptionally low levels” through mid–2015, six months longer than previously planned.
In a speech in Indianapolis Monday that’s well worth reading, Bernanke claimed that “although monetary policy cannot cure the economy's ills,…we do think it can provide meaningful help. So we…are going to do what we can do and trust that others, in both the public and private sectors, will do what they can as well.”
Trust whom? Congress? The Obama administration?
Bernanke’s new policy was an implicit admission that despite everything his agency—and Congress, and two presidents, with TARP, various stimulus programs, and tax cuts—had done, the economy and employment were still in a rut.
In other words—mine, not his—the Fed had failed to accomplish its goals. (I’m sure the chairman would disagree, although Fed spokespeople didn’t respond to my request for comment by deadline.)
Bernanke went to great lengths to defend his actions. In his speech at the Kansas City Fed’s annual economic meeting in Jackson Hole, Wyoming in August, he actually tried to quantify how successful his various rounds of “quantitative easing” were—in academic lingo that made the wonkiness of Wednesday’s presidential debate sound like a series of clever ad jingles.
He said simulations done by the Fed showed the policies “have provided significant help for the economy…As of 2012, the first two rounds of [quantitative easing] may have raised the level of output by almost 3% and increased private payroll employment by more than 2 million jobs, relative to what otherwise would have occurred.”
This is pretty striking—I’ve never heard a Fed chairman pound the table for his actions like this.