Quantitative Easing and the State of the Recession
After a dismal start to an “economic recovery,” rumors are swirling that the Federal Reserve will relaunch its quantitative easing programs to up the Fed’s balance sheet as much as $2.5 trillion. Previously, according to insiders at the Fed, Bernanke had the ability to expand the balance sheet to as large as $5 trillion.
Oh No!
Without hiring for census workers, recently employment data would’ve been nearly as dismal as it was when the recession was just beginning. Hundreds of thousands of employees have been added for the sole purpose to count their fellow man, and as many as 250,000 will be laid off in July as the temporary jobs expire. Just last month, census workers made up 411,000 out of 431,000 new jobs created, and soon enough, all those 411,000 people will be left jobless again.
The Irony of Jobless Recoveries
Jobless recoveries simply do not happen for a number of reasons. First, any recovery that comes without a gain in employment happens only statistically or following a massive increase in personal productivity, we’ve had neither. Second, each unemployed person is another person who is unproductive, and drains the system collecting 99 weeks of unemployment. Third, zero job creation in an economy with no real increase in productivity shows that less goods and services are being created.
Why the Fed Must Try Quantitative Easing
The Federal Reserve will have to try quantitative easing because it is the only portion of the government that can actually do it. The American public would never allow Congress to pass another spending bill. Even if they did, the Treasury couldn’t afford to pay for it, and it’s getting harder and harder to finance US debt. The Federal Reserve is the last resort. It can “print (electronic) money” cheaply. It can take strain off the credit markets by displacing fixed income capital demand. It can create money without any servicing expense. And finally, it can do all of the above without the backlash from the American people through their representatives.
