The Fed Moves…But Will It Help?

September 14th, 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

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4 comments in reply to "The Fed Moves…But Will It Help?"

  1. rjs says:

    damn. that graph says just what ive been thinking…

  2. Ari C. says:

    I suspect that graph would be more illustrative if it also compared a country with more appropriate monetary policy like Sweden or Switzerland…

    • Robert Bostick says:

      Absolutely right. Because our policy makers fail to understand and benefit from the policy space afforded by being monetarily sovereign, this graph will become the “new normal.”Failure to understand monetary sovereignty is a failure to understand modern economics in a fiat currency world.

  3. Logan Mohtashami says:

    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.