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There is growing debate over whether another round of quantitative easing (QE2) will ease unemployment.
In an interview with the Financial Times, Philadelphia Fed President Charles Plosser set out guidelines for more stimulus. He said: "I think that before we engage in further quantitative easing, we need to be very clear about what it is we are trying to do, how we're going to go about doing it, how we're going to measure whether we're effective at it or not, and how we're going to communicate that."
The debate within the Fed is whether and how more stimulus will ease unemployment, which is now near 10%. Let's face it, here we are nearly two years into the recovery and unemployment has risen instead of fallen. This is after the Fed pledging or spending $12.2 trillion to bail out a handful of bankers.
The public wants to hold the Fed accountable for this next round of stimulus. They won't stand for the Fed simply buying more treasuries without a clear end goal.
Fed president Ben Bernanke has made it clear that he wants to avoid deflation at all costs. What really does that mean? It means that Bernanke wants to create more inflation. That means higher prices across the board. The key question is, can Americans tolerate more inflation?
Another voice of reason, New York Fed President William Dudley, wants the Fed to specify the percentage of inflation it intends to create.
Plosser is concerned that low interest rates will not necessarily bring down unemployment. He says that long-term rates have already come down 100 basis points, so what is the need to bring them down another 20 basis points? He also worries that the Fed will not be able to pull all this money back in when the time comes.
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Reader Comments (Page 1 of 1)
10-04-2010 @ 9:12PM
william lindblad said...
Forgive me as I can't quite understand the reasoning?
Another round of "stim" will prove useless as everything was blown in the original "TARP" package. The government found themselves up against the wall and moved expediently, too expediently, as they neglected to put strings on the package. If they had done so and mandated that in return for bailout money the banking system would have been obligated to return to "normal" banking in which credit was issued based on the ability to repay. They could also have stipulated many other things including how credit card interest would be effected, in line with bank borrowing credit and the prime rate. All in all, they blew everything and the banking system continues to be the main drag on the economy. This is a small group of people that deserve to be charged with treason as they are sabotaging the economy of this nation, if not the world. The FED continues to be their support and this pseudo-government agency no longer deserves to exist. I view them as Traitors as they conspire with the banking industry to serve the industry's needs and not the good of this country. They have spent untold and unaccounted amounts of taxpayer money to line the pockets of those who felt the pangs of greed and willfully and wrongly went about filling their stomachs. All at the expense of the middle class of this nation. It is the middle class that is still losing their jobs. It is the middle class that now is in arrears with their mortgages while the bankers scream foul and the Fed continues to shore up their books.
I think a good solution would be to find some secluded and isolated island - and exile the entire crowd.
We cannot do this as these people are good upstanding citizens and have our best interests at heart.
The FED is a CORRUPT and USELESS institution. I think that the people should ask their NEW CONGRESSpeople why it should continue to exist?
If the mire that is the making of the banking system continues - look forward to at least 10 more years of economic hardship. The problem can be fixed - but it has to start at the core.