Ezra Klein on the Federal Reserve–Ben Bernanke is the economy’s tough, older friend

The Federal Reserve’s announcement Thursday is a big deal.

It’s a big deal because of what they’re doing. They’re buying $85 billion in assets every month through the end of the year, and then they’re potentially going to keep doing it in 2013. They’re promising to keep interest rates low through the recovery, and then keep them low after the recovery strengthens.

But it’s a bigger deal because of what they’re saying. Thursday, the Federal Reserve said, finally, that they’re not content with 8 percent unemployment and a sluggish recovery, and they’re willing to actually do something about it. If you’re an investor or a business owner trying to decide what the market is going to look like next year, you just got a lot more optimistic.

Read it all and there is more (with reasons for concern) there.


Posted in * Culture-Watch, * Economics, Politics, Consumer/consumer spending, Corporations/Corporate Life, Economy, Federal Reserve, Globalization, History, Psychology, The Banking System/Sector, The Credit Freeze Crisis of Fall 2008/The Recession of 2007--, The U.S. Government

5 comments on “Ezra Klein on the Federal Reserve–Ben Bernanke is the economy’s tough, older friend

  1. Capt. Father Warren says:

    [i]If you’re an investor or a business owner trying to decide what the market is going to look like next year, you just got a lot more optimistic[/i]

    That is laughable beyond belief! A stock market inflated by a gusher of printed money does nothing to stimulate product demand which is what makes business grow. A deflated dollar makes imported raw materials more expensive; does nothing to make a business grow. Obamacare is still being implemented and business knows not what to make of that; the hiring window will remain closed. Ominous talk of economic collapse becomes more prevalent; yep that will make businesses feel good about stepping out with growth plans. Whoops, all manner of taxes going up next year, hmmm how will that help business expansion, stimulate demand: maybe not so good.

    Yep, this is sure to turn out so well for us! Not.

  2. drummie says:

    Capt. I couldn’t agree more. With our apologist in chief’s foreign police of apologizing for being American and appeasement coming to fruition, oil is going to go up dramatically. Now with all this “new printed” flat money, inflation will start to rise, probably dramatically. I see nothing good economically coming from all this. It seems these folk have never heard that insanity is doing the same thing over and over and expecting different results. Until Obamacare is recended and burdensome regulations are cut back, business are going to sit on their money and stay in a holding pattern. We also need an administration that will allow us to try to get closer to energy independence, not sell us windmills and electric cars. We can not change administrations quickly enough.

  3. AnglicanFirst says:

    “If you’re an investor or a business owner trying to decide what the market is going to look like next year, you just got a lot more optimistic.”

    Retired pertsons can only be hurt by the inflation that is sure to follow from all of this “pumping.”

    The buying power of retiree income will only decrease with inflation and those who will claim to be increasing mretiree income to keep up with the inflation will never restore mthe lost buying power caused by inflation.

    Bernanke’s ”fiddling around’ with the dollar will make millions of Americans much poorer.

  4. Tomb01 says:

    Um, so where exactly is this $85 Billion coming from? That would be a Trillion Dollars in fiscal 2013. Are we printing it (causing the price of oil to go even higher with the deflationary impact it will have on our dollar), or perhaps borrowing it (adding ANOTHER Trillion to the deficit in 2013)? Our governments fiscal policy is terrifying.

    Can you say ‘Greece’?

  5. CharlietheCook says:

    I don’t like QE, but to clarify a point (this is from Wikipedia, a convenient source):

    Printing money

    Quantitative easing has been nicknamed “printing money” by some members of the media,[75][76][77] central bankers,[78] and financial analysts.[79][80] However, central banks state that the use of the newly created money is different in QE. With QE, the newly created money is used for buying government bonds or other financial assets, whereas the term printing money usually implies that the newly minted money is used to directly finance government deficits or pay off government debt (also known as monetizing the government debt).[75]

    Central banks in most developed nations (e.g., UK, US, Japan, and EU) are forbidden by law to buy government debt directly from the government and must instead buy it from the secondary market.[74][81] This two-step process, where the government sells bonds to private entities which the central bank then buys, has been called “monetizing the debt” by many analysts.[74] The distinguishing characteristic between QE and monetizing debt is that with QE, the central bank is creating money to stimulate the economy, not to finance government spending. Also, the central bank has the stated intention of reversing the QE when the economy has recovered (by selling the government bonds and other financial assets back into the market).[75] The only effective way to determine whether a central bank has monetized debt is to compare its performance relative to its stated objectives. Many central banks have adopted an inflation target. It is likely that a central bank is monetizing the debt if it continues to buy government debt when inflation is above target, and the government has problems with debt-financing.[74]