How screwed are we? Very:
The Federal Reserve opted Wednesday not to take significant new steps to hasten the economic recovery, further angering critics who believe it has failed to adhere to its dual mandate to keep unemployment low while maintaining price stability.
But in response to questions from skeptical media, Fed Chairman Ben Bernanke reminded reporters that the Fed isn’t the only game in town, and practically begged Congress to take affirmative steps to boost recovery.
Bernanke cited “Fiscal restraint at the federal state and local levels,” as a key head wind threatening the recovery.
“Monetary policy is not a panacea,” he implored. “Monetary policy by itself is not going to solve our economic problems. We welcome help and support from any other part of the government, from other economic policy makers. Collaboration would be great.”
Yeah, fat chance that Congress will do anything. The official stated position of the GOP is we have too many policemen, firemen, and teachers, and what we really need to do is cut back on food stamps while giving the Koch brothers some more tax cuts.
Maude
The saying is the Fed has a nearly empty toolkit.
The repubs are busy trying to destroy Obama.
It’s too hot.
Brachiator
This is seriously fucked up. On top of this, you got the Ron Paul nutjobs and some of the Tea Party People convinced that the Fed are a conspiracy of unconstitutionally appointed monetary elitists who should be booted so that the Gold Standard Free Market(tm) can fly and unleash prosperity unicorns all over the country.
I look forward to hearing what the Mittbot 2000 has to say about how he would get the Fed working to stimulate the ecoonomy.
Maybe he’ll say he would fire them.
PeakVT
Congress should act. It won’t.
Ball’s in your court, Ben, like it or not.
(The question of whether further QE would help the economy to actually grow, or cause price inflation without corresponding wage inflation, is still an open one. However, I continue to think the possibility of creating more jobs is worth risking putting some additional strain on those who do have jobs. And no matter what happens – including nothing, which is a possibility – the Fed would monetize a further $1T of US debt, which wouldn’t hurt.)
JPL
Maybe Ben wants a tax cut…hell with the recovery.
also, too.. great post John
beltane
@Brachiator: I’m sure Mitt’s solution involves working Americans giving up 30% of their meager incomes directly into the Swiss bank accounts of Job Creators. Not in those words, of course, but something to this effect.
BGinCHI
Fucking hell.
Kthug doesn’t even have to write a new post about this. He only has to link to about a thousand other posts he has already written that explain why this is foolish.
Austerity is the new growth.
Judas Escargot, Acerbic Prophet of the Mighty Potato God
I think Obama should spend the summer issuing creative executive orders and/or executive policy announcements, FDR-style. A legal mind like that in the WH could certainly cause some righteous mischief (and at least get a little help out there in what ways he could).
The GOP-packed courts (and eventually SCOTUS) would then squeal for joy at getting the chance to relive the 1930s and overturn item all, one by one…. as the GOP House draws up articles of impeachment, instead of voting on jobs or infrastructure bills.
While America watches.
They’ve basically walked themselves into the trap of being quite obviously a Do-Nothing Congress. It would be criminal for the Obama admin/campaign to not throw them an anvil right about now.
Brachiator
@Judas Escargot, Acerbic Prophet of the Mighty Potato God:
FDR had an impressive brain trust advising him (especially the amazing Labor Secretary, Frances Perkins). Obama can’t do it all himself.
And adding to his problems is a dumb ass Republican Congress, intent on interfering with Obama’s ability to make cabinet appointments.
Unfortunately, too many voters see this as Democrats and Republicans just not getting along. They don’t see, or dismiss, the insane obstructionism.
Villago Delenda Est
@JPL:
Fuck that noise.
What Ben (and a bunch of Republicans) need is a totally different kind of cut.
4tehlulz
FWIW, Calculated Risk predicts QE3 on 8/1.
Assuming of course, that Paultards don’t burn the Fed down before then.
SteveinSC
What I don’t understand is why the American public is not hard-over against this gang of political terrorists. In my younger days, I thought I was a socialist, and then later communist. Later I came to believe that we had a better way with a, generally agreed to, capitalist society with controls and a safety net. But we found out that even a wooden stake driven into the hearts of these assholes is not enough.
Now, where’s my copy of Das Kapital…it’s around here someplace.
TenguPhule
BGinCHI
@SteveinSC: How about this:
“Our epoch, the epoch of the bourgeoisie, possesses, however, this distinct feature: it has simplified class antagonisms. Society as a whole is more and more splitting up into two great hostile camps, into two great classes directly facing each other — bourgeoisie and proletariat.”
The terms may change, but the ideas haven’t.
Judas Escargot, Acerbic Prophet of the Mighty Potato God
@Brachiator:
The departments still exist. Someone is running them (presumably lifer civil servants).
There’s nothing in the Constitution preventing Obama from forming an informal Shadow Cabinet, taking counsel and advice from these informal domain-level experts, and using executive orders or policy statements to direct senior personnel at the various departments to do… well, something. Anything.
When Congress raises a stink and interferes, all he has to say is “You won’t approve any of my cabinet appointees, and we need to get stuff done. We’re through waiting.”
Independents (including more than a few who lean GOP) would like this. And it has the interesting side effect of fighting the current paralysis, even if only a little.
Brachiator
@Judas Escargot, Acerbic Prophet of the Mighty Potato God:
It’s not just about running the departments. It’s about having access to the best advice in something more than an ad hoc basis.
But I take your point, and it may be the best that Obama gets.
Turgidson
@Judas Escargot, Acerbic Prophet of the Mighty Potato God:
If Obama did that on a large scale, Issa, Steve King, Allen West, DeMint, etc. would respond by going straight to arranging a time and place for the guillotine.
Which would be kinda funny.
Tonal Crow
Your article and your interpretation of it don’t give the full story. See “Fed ramps up economic stimulus, ready to do more”:
MosesZD
Shorter Bernanke: Krugman and the Salt Water economists were right, the Republicans and Fresh Water economists were wrong.
Judas Escargot, Acerbic Prophet of the Mighty Potato God
@Turgidson:
Somehow, I just don’t think they’d go that peacefully…
(I kid, I kid).
geg6
You are giving Bernanke too much of a pass here, John. Though he is right that Congress should do its job, monetary policy can help out without a parallel congressional action. Kthug has explained this over and over and over again, ad infinitum. Face the truth: Bernanke is Republican and is doing the bidding of his GOPer billionaire overlords, fucking us all over and perfectly happy to turn us into a banana republic. His own scholarship shows that he is perfectly aware that he can allow a little inflation to help right this sinking ship but he chooses not to act, quarter after disastrous quarter. Why do you suppose he chooses to act contrary to what he knows us true?
patroclus
With Fed Funds at roughly 25 basis points for several years, there’s not a whole lot that the Fed can do right now. As Tonal posted, the Fed has expanded its quantitative easing; which helps keep rates low and I expect that they’ll continue to do that, but what the country needs is economic stimulus of the fiscal kind. And that comes from Congress. With the Republicans in control, that ain’t gonna happen until, possibly the lame duck session.
Turgidson
@Judas Escargot, Acerbic Prophet of the Mighty Potato God:
you might be kidding…not 100% sure I was. Obama going it alone trying to get the government to work would surely be the BIGGEST CONSTUTUSHUNAL CRISIS EVAR to those braindead morans. They might stop short of calling for the near president’s execution, though. I’ll give them that much credit.
Tonal Crow
@patroclus:
Yep. The Republicans are sabotaging America for political gain. It’s the Republican War on America.
Linda Featheringill
@SteveinSC:
Please don’t ask me for chapter and verse, but Marx said that every economic system is the child of the preceding one. Now how we persuade the rather rapidly deteriorating international capitalism to give birth to something better, I don’t know.
Steeplejack
Chairman Bernanke is refusing to do what Professor Bernanke said should be done under such circumstances. WTF?!
Davis X. Machina
Fiscal comes from the Latin word ‘fiscus’ meaning ‘shiftless colored folk’
A lot of people don’t know that….
Maude
@Steeplejack:
It’s hot.
PeakVT
@patroclus: Operation Twist isn’t adding new money to the system. It’s just swapping short-term bonds for long-term bonds in the Fed’s portfolio.
mclaren
For once, Bernanke is right. We’ve hit the zero bound on interest rates. The Fed can’t do much. It’s pushing on a string. Under these economic circumstances, the only sensible policy is more government splending, and lots of it. So of course America has decided to do exactly the opposite and cut spending, just like the lunatics running the European economies.
Krugman has been raging about this for years.
The Republicans have welded themselves into their cockpits and they’re flying their kamikaze missions straight into the U.S. economy. What’s worse, Barack Obama has decided to help them:
Source: MSNBC, “Obama: Federal gov. needs to tighten its belt,” 29 November 2010.
It’s insane, insane, insane, insane, insane, insane, insane.
And of course no one pays any attention to Krugman. After all, what does he know? He just has a Nobel prize in economics.
Cue the kooks and cranks and crackpots to crawl out of the woodwork and start chanting that I’m mentally ill, in need of therapy, off my meds, [insert mindless name-calling here], in…3…2…1…
Chris T.
The problem boils down to this: the Fed can add to the money pools but they can’t make any of that cash flow.
Or, to switch metaphors to one that I think most people can grasp: to the extent that the economy is like a car, with gas (accelerator) pedal and a brake, the control of the two pedals is split up: Congress have the gas pedal, and the Federal Reserve have the brake. Congress can make the car go faster by spending more, or allow it to slow by spending less. The Fed can push the brakes harder, or less hard.
Right now, the economy “wants” to creep forward in the lowest gear. The Fed has the brakes all the way off, so it’s doing that. Congress won’t push the “go” pedal because that takes at least 60 Senators to agree to it.
catclub
Yglesias had a good question for Bernanke:
If inflation was 8.2% and unemployment was below 2%, what would you do?
The almost certain answer is: EVERYTHING IN THE BOOK in order to lower inflation, and by the way, raise unemployment rates.
But he is unwilling to address the converse by raising inflation above 2% in order to lower unemployment. His hands are tied.
No they are not. He just is unwilling to risk increasing inflation by any amount.
Dual mandate indeed. And Democrats in congress do not consistently demand action on the dual mandate.
CVS
And what did Obama really expect when he put a Republican in charge of the Fed? Really, what did he expect?
Bulworth
The Republican position is that there should not be a dual mandate and that the Fed exists only to keep inflation super low. But for some strange reason this rather extreme and unique view receives no attention from our “liberal” media, which is presently wringing its hands over the totally nonsubstantive presidential campaign.
tcolberg
The Fed is not run by Bernanke, he’s just the chairman on a board of governors. He can be outvoted, and likely is on some issues by other members of the board–the regional bank presidents tend to be very conservative. When Bernanke speaks in the press conferences, he’s speaking as the chairman of the organization and isn’t free to just say whatever he would like (such as by saying that he disagrees personally with the policy decisions of the organization).
Even if he were the only person in charge, he might not act the same as Professor Bernanke just because people tend to be a bit more risk averse when they are in positions of responsibility, rather than writing mere academic papers. He also is probably cognizant that as isolated the Fed is from the political process, it still has to deal with politics and threats from Congress.