The Fed Moves…But Will It Help?
Sep 14, 2012 at 3:25 am
That’s the question I tackle here at MSNBC’s blog. And I’ll be on the Ed Schultz show later to discuss with the great Ez Klein.
The piece elaborates on my view that while the new moves announced by the Fed–more forward guidance (we’ll keep rates really low for really long) and more bonds buys (QE3)–will help a little bit, we need more than a little bit of help. IE, we need fiscal policy to stimulate the missing demand that will in turn give more traction to the Fed’s low interest rate agenda.
Greg Ip goes into some useful details here, including this interesting graph…obviously, a lot going on in this picture, but I think it’s suggestive of the diagnosis above: the missing ingredient is more demand.
Source: Greg Ip, The Economist
3 Responses to “The Fed Moves…But Will It Help?”
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About
Jared Bernstein’s areas of expertise include federal and state economic and fiscal policies, income inequality and mobility, trends in employment and earnings, international comparisons, and the analysis of financial and housing markets.
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damn. that graph says just what ive been thinking…
I suspect that graph would be more illustrative if it also compared a country with more appropriate monetary policy like Sweden or Switzerland…
Even with low taxes, Crazy low interest rates and trillions poured into the system by the US government. The after tax/expense incomes of Americans can’t support our consumer economy in a de leveraging economy to grow more than 3% without a third financial bubble.