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Probably the most important political news from this week is not Romney’s gaffes but the fact that the Federal Reserve decided they were going to take no farther action to reduce unemployment. From the Federal Reserve:
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects economic growth to remain moderate over coming quarters and then to pick up very gradually. Consequently, the Committee anticipates that the unemployment rate will decline only slowly toward levels that it judges to be consistent with its dual mandate. Furthermore, strains in global financial markets continue to pose significant downside risks to the economic outlook. The Committee anticipates that inflation over the medium term will run at or below the rate that it judges most consistent with its dual mandate.
To support a stronger economic recovery and to help ensure that inflation, over time, is at the rate most consistent with its dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.
The state of the economy in the months going into an election is always important to the fate of an incumbent president. It is especially important this year with voters rating jobs/the economy as their top priority. Federal Reserve Chair Ben Bernanke believes the Fed still has some tools it could use to help increase employment but this announcement means the Fed is not going to use them. While the FOMC will meet again in mid September and could decide at that point to do more, it is likely any action they might take then will be too late to impact the election.
Since further stimulus from the state or federal government level is basically out of the question, this means President Obama will likely face the election with the same anemic economy we have now.
38 Comments
Another unforced error by Obama–re-nominating Gentle Ben for another term as Fed head–comes back to haunt him.
The FRB is out of ammunition & has been for years, ever since int rates=0.
the big zero has served his purpose by doing less than nothing substantial over the last 4 years. By surrounding himself with the same people that got us into this he guaranteed change would not happen. Aided by Reid’s refusal to eliminate the filibuster in 08 because senate tradition is so much more important than fixing the country the opportunity for improving has been eliminated. Wait till you see what zero will do during his second term when no one will have any influence on his neoliberal actions.
the idiot citizens of this country are getting the bad politicians and policies they deserve…..
Of course they’ll do nothing. So far as I can tell, they have deliberately engineered a so-called liquidity trap, by paying interest on reserves, in order to shut down the economy. Apparently they want people unemployed. The ECB is doing something similar.
Agree with eCAHN. No love lost on my part with the Bernank, but whadda they gonna do at this point with interest at zero % for years on end??
Face it: the Fed’s outta options, unless there’s something I’m missing (always possible).
But hey: the 1% is “liberally” spending on buying the whores in Congress & the White House in this year’s laughingly named “election.” So I guess there’s jobs to be had in that, uh, game??
No. They could lower the interest on reserves to get some of that money into circulation. In fact, I’d like to see them increase the reserve requirements and charge a fee (negative interest) for holding their money.
Pushing on a string.
QEIII, IV, V…
Like that’s done a lot of good.
Operation Twist.
All just gimmicks.
I think Obama will be very fortunate to face “the same anemic economy.”
It seems more likely the economy will tank by this fall.
It is a small world among our corrupt leaders. However, the glass ceiling for Fraudster women seems to have been broken. Women can be just as corrupt as the men. Michele Davis will lead a vigorous effort to defend Mittens record of the private sector looting heathy companies.
She previously led the public propaganda effort defending British Petroleum, who polluted the Gulf of Mexico.
The President may not be getting help from the Fed, but Michelle will be glad to help. In fact, she has already helped the President, in the transition. She claims, many of the Fraudsters she recommended, such as Little Timmy Geithner, were hired by the President. She frequently talked on the phone and visited the transition team.
I wish some Democrats had been allowed to make suggestions.
“Obama will not be getting any help from the Federal Reserve”?
Well, Jon, “it” really ISN’T “about” Barack Obama.
Or is it?
I can think of a whole bunch of people who could have used some real and actual help from Obama … who could still use such real and actual help.
Poor Barack.
What a shame.
Yes, the poor old dear will just have to stand on his own sorry record.
And, it ain’t much.
Because Barack Obama has not DONE very much … except to protect Wall Street’s criminal fraud and kowtow to Big energy, Big, pharma, Big insurance, and Big bucks.
And, eCAHN is correct, the FED has “got” nothing.
And, tammanytiger is correct.
And, monkeybreath is correct.
And, wigwam …
And, onitgoes
Quelle surprise?
For whom?
Who is really surprised?
Are you suggesting that Barack Obama is surprised”?
He is likely to “win”, anyhow, Jon, so don’t worry, overmuch.
And then what will he do but … even further destruction to the social contract, the social safety net, and whatever remains of the “New Deal”.
You think he’ll need the FED’s “help”, then?
If he needs it … then he’ll have it, such as “it” is, mainly fear-mongering, one imagines … but it will not help any of the MANY people who really need actual help, and of course, it will NOT be designed to provide “that” help … now will it?
Jon, forgive me, but I just cannot work up any sympathy for Obama and his “plight” … given the “circumstances”, the “history”, and the intent.
We all know that, right?
DW
The QEs have put too much focus on improving banks bottom line and not enough focus on improving communities bottom line. I still think that the Fed purchasing municipals could help the economy. If communities had money to keep or even improve their infrastructure it could help spur the economy.
Of course, I don’t think it is entirely the Fed’s responsibility to carry the economy. The President and Congress have done very little and don’t really deserve “help.”
BOTH parties adore the private sector. They live and breathe for the day they can collect their 6 figure income with benefits for doing nothing other than congratulating the Capitol police, naming park benches, and proclaiming daily their lack of imagination when it comes to private entities defrauding the population.
Pushing on a string indeed. Today on cnbc one of the opiners on Fast Money offered that QE and ZIRP are exhausted as remedies, and have been so, from almost implementation.
All this time is equivalent to banging your head with a hammer and being grateful when you stop. These actions are synthetic and don’t allow the markets to function as organic entities.
It is time for interest rates to rise, which would send equities down to their real level since this ‘recovery’ is a drawing on smoke.
Saving money will become an asset again.
Still, the real problem is unemployment and lowered wages, which is the darwinistic design behind this part of the economy.
The ‘job creators’ have been exploiting this by shedding older experienced, and ‘expensive’ employees with young indentured post grads, and lowering compensation by making the competition for jobs so steep.
Until, there are gainfully employed workers with disposable income,
this decade is lost.
I have great concern if we get to the place where the Fed makes its goals with the objective of satisfying the goals of any politician. We may or may not agree with President Obama, but it is a certainty that we will see some future president which which we do not agree. To set the precedent that the fed is an arm of the party in the white house is fraught with danger. Complete independence would be my goal.
Okay. How about we settle for getting to a place where the Fed makes its goals with the objective of doing its f—ing job?
Saving money though is the opposite of what the economy needs. The economy needs money placed into it to create jobs. If you get sufficient job creation then businesses are forced to compete for workers. Competing for workers could/should theoretically improve compensation.
That being said, this Congress and this President have made it their personal mission to insist that “deficit reduction” or savings are the key to recovery. They’re wrong.
Nice catch! The title really does give Jon away.
I wonder if Obama thinks it’s all about him*. He sure acts like it.
* Not his legacy, but his financial well being once he leaves office.
The Fed has done it’s job. It’s emphasis has been on the banking sector. That shouldn’t be a surprise though since the Fed is a collaborative public private entity. It’s private concerns are the banking sectors. It’s efforts have primarily gone to stabilizing the banks bottom lines.
Hmmmm. So the Fed bought treasuries from the banks for top dollar, given that the interest rate was so low. They paid the banks with Fed credit (aka reserves). And then they paid the banks interest interest not to move that fresh money into the economy by investing and/or loaning it.
So how was that supposed to help the economy. I thought that monetizing the debt was to inject fluidity into the economy to get it working again. I’m perplexed.
Love it. Obama “The Powerless One” moved heaven and earth to keep Bernanke at the Fed. Seems Obama uses his presidential powers when it suits the elite. Obama really, really deserves to lose this election.
All of the focus I have seen has been on fixing the housing mess and getting bad mortgages off the banks books with QE. I think our economy would be in a lot better shape had it’s focus been on helping the states weather the financial storm.
I’m not surprised though that the Fed would focus on the banking sector. They are bankers first and foremost and public servants second. It’s one of the reasons I wholeheartedly support there being SOME sort of nonpartisan review of its actions.
How is the Fed buying up $1.5T of treasuries supposed to help get bad mortgages off the banks’ books?
It’s helping to secure their balance sheets. That way their losses are offset.
It did help their economy. You’re too locked in to your monetary theory.
It’s foaming the runway so they’ll live to execute new scams.
That’s not what their economy needs.
Enough with this f**cking technocratic legalism. This is a heist! Now shut the fuck up and empty your drawers.
Additionally the Fed also spent over a trillion on Mortgage backed securities to bolster the housing market.
http://www.nytimes.com/2009/01/06/business/economy/06feds.html
Mind you these mortgages were already “guaranteed” so the banks were getting money from taxpayers no matter what.
Americans don’t deserve unemployment, but Obama deserves what he gets from Bernanke.
More than likely, the “failure of the economy” is going to be the manufactured October Surprise that the banksters and their minions at the Fed are going to use to destroy Obama at the polls.
And don’t tell me that the banks would not do that because they are Obama’s friends. He is going to be more than happy to retire to the speaking circuit where he will make millions giving speeches about how the US is the greatest country in the world thereby keeping his sycophants from rising up against their oppressors. And all this while sitting on the boards of directors of a dozen companies collecting millions of dollars as his payoff for delivering the country into the hands of the facsists
“Saving money though is the opposite of what the economy needs. The economy needs money placed into it to create jobs.”
That is correct. Mindless consumption is necessary to keep the whole house of cards upright any truthful economist can tell you that. However they will not tell you that their entire field of study is pseudo-science at best or a destructive religion that is destroying the environment at worst.
Their “theories” are based on magical thinking, they create models based on some alternate reality where unlimited continuous growth is possible and avarice is a preeminent human quality. Even parasites in nature, must find some level of optimal virulence.
“Enough with this f**cking technocratic legalism. This is a heist! Now shut the fuck up and empty your drawers” said an agitated Bernanke at the disapproving public, in his last public appearance before becoming the first technocratic overlord of the United States.
“the Federal Reserve decided they were going to take no farther action to reduce unemployment.”
I find it extremely doubtful that the Fed can reduce unemployment no matter what it does. Hard as it is to believe, there is a world of difference between the ideological neoclassical economic models and reality:
“The problem with people who understand finance is that they don’t understand reality.”
-Dimitry Orlov
I think mindless consumption is overstated. There are plenty of purchases of goods and services that can be made that would improve our country.
It might be different if we had the best education system or the best health care in the world or the best anything for that matter to insist that we need to stop spending. We don’t. As of yet we pretty much have an unlimited amount of money we spend to blow things up and incarcerate people and everything else has gone by the wayside in an effort to reduce, reduce, reduce. It’s ridiculous.
Can’t and don’t want to are different animals.
It’s absolutely absurd to suggest that the Fed couldn’t have and still couldn’t improve states outlook(and the workers they employ) by purchasing municipals. The reality is that many jobs were lost because the states were looking at increased borrowing costs coupled with a decrease in revenue.
Oh and a person that thinks the world of finance is “reality” today is a fool.
“There are plenty of purchases of goods and services that can be made that would improve our country.”
In the short term perhaps, but that is when the mindless consumption is the most necessary. Every one loves the post war boom, just not the war.
“As of yet we pretty much have an unlimited amount of money we spend to blow things up and incarcerate people and everything else has gone by the wayside..”
By this, I gather you are open to having a more direct control on how money is used, and taken to its logical conclusion, a more direct control on how resources are used. Therefore shouldn’t the people decide this through democracy?
The problem with that is right now “democracy” is pretty much a purchased commodity. That’s why we have deficit hawks hawking the idea we need to cut, cut, cut programs for children or the elderly while preserving the status quo on defense and tax cuts for the richest of the rich.