If you queried American citizens as to whether they would support a monetary experiment conducted by the Federal Reserve to stimulate economic growth — an unorthodox approach that would mostly benefit the government, large corporations and wealthy investors at first, but would ultimately help everyone else — would they approve?
And if you explained that it might take some time to deliver the desired outcome of higher employment at higher wages, and that people in the vast majority of households would have to accept much lower rates of return on their savings in the meantime, wouldn't a few perceptive respondents tilt their heads and ask: How long?
So why does such a reasonable question raise such ire from former Fed Chairman Ben Bernanke? Responding to a recent editorial in The Wall Street Journal citing persistent low economic growth as perhaps an indication that the Fed's unconventional monetary policies are not working as intended, Bernanke fairly bristled with indignation, writing in his Brookings Institution blog that he never promised monetary policy would be a "panacea" for our economic troubles — and besides, "nobody claims that monetary policy can do much about productivity growth."
Such defensiveness is not reassuring. It's been nearly six years since the recession officially ended in June 2009. Still, the Fed continues to pursue its zero-interest-rate policy in the name of supporting the recovery, even as the negative aspects of this approach are imposing significant economic costs.
According to a report issued in March by Swiss Re, the world's second-largest reinsurance company, the Fed's policy of financial repression has cost U.S. savers roughly $470 billion in lost interest income. Other unintended consequences described in the report include "crowding out viable private markets" and "lowering the funds available from long-term investors to be used for the real economy."
Bernanke's riposte to those who would question the wisdom of perpetuating zero rates is to assert that the inflationary consequences predicted by some have not materialized. But after so much pumping, subdued inflation is hardly grounds for crowing; it's further proof that the Fed's policies are not working. Cheap money is not expanding production and raising wages as planned, it's not increasing demand — and thus not raising prices for goods and services. Inflation is the dog that's not barking.
http://thehill.com/blogs/pundits-blog/finance/241836-reckoning-for-the-fed
And if you explained that it might take some time to deliver the desired outcome of higher employment at higher wages, and that people in the vast majority of households would have to accept much lower rates of return on their savings in the meantime, wouldn't a few perceptive respondents tilt their heads and ask: How long?
So why does such a reasonable question raise such ire from former Fed Chairman Ben Bernanke? Responding to a recent editorial in The Wall Street Journal citing persistent low economic growth as perhaps an indication that the Fed's unconventional monetary policies are not working as intended, Bernanke fairly bristled with indignation, writing in his Brookings Institution blog that he never promised monetary policy would be a "panacea" for our economic troubles — and besides, "nobody claims that monetary policy can do much about productivity growth."
Such defensiveness is not reassuring. It's been nearly six years since the recession officially ended in June 2009. Still, the Fed continues to pursue its zero-interest-rate policy in the name of supporting the recovery, even as the negative aspects of this approach are imposing significant economic costs.
According to a report issued in March by Swiss Re, the world's second-largest reinsurance company, the Fed's policy of financial repression has cost U.S. savers roughly $470 billion in lost interest income. Other unintended consequences described in the report include "crowding out viable private markets" and "lowering the funds available from long-term investors to be used for the real economy."
Bernanke's riposte to those who would question the wisdom of perpetuating zero rates is to assert that the inflationary consequences predicted by some have not materialized. But after so much pumping, subdued inflation is hardly grounds for crowing; it's further proof that the Fed's policies are not working. Cheap money is not expanding production and raising wages as planned, it's not increasing demand — and thus not raising prices for goods and services. Inflation is the dog that's not barking.
http://thehill.com/blogs/pundits-blog/finance/241836-reckoning-for-the-fed
