Tuesday, October 16, 2012

Why Bernanke Is Doing QE3

Federal Reserve chairman Ben Bernanke is begging Congress to do something about unemployment.

Our assessment and that of the research literature is that the polices we've undertaken have had real benefits for the economy, that they have provided some support, that they have eased financial conditions, and help reduce unemployment. All that being said, monetary policy, as I've said many times, is not a panacea. It's not by itself able to solve these problems. We're looking for policy makers in other areas to do their part. We'll do our part and we'll try to make sure that unemployment moves in the right direction but we can't solve this problem by ourselves."

The Do Nothing Congress went on recess without resolving unemployment for military veterans. Republicans killed the Veteran Jobs Corps bill. If Republicans don't want to create jobs for veterans coming back from Afghanistan and Iraq then what hope is there. Republicans also don't want Bernanke to enact QE3.

Mitt Romney

In a speech to New York City donors on Friday, Romney said in reference to QE3 that the course for America was to foster economic growth, not print more money.

"We're not going to have to look for the sugar high that comes with QE3 or QE4 or QE5 or QE6," Romney said, according to Bloomberg. "The real course ahead for America is to encourage the growth of our economy, not just to go out there and print more money."

I wonder if Romney paid attention to his economics courses when he got his MBA. Quantitative easing is the Federal Reserve buying assets, such as mortgage-backed securities, from major banks. The theory is the influx of cash in the market will help the economy and create hiring. Fiscally speaking, Bernanke is throwing a Hail Mary because Congress refuses to take action on unemployment. Republicans don't want to pass stimulus packages or QE3. There policy on unemployment is literally tax cuts for the top 1 percent and doing nothing else.

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