During my daily perusing of the Wall Street Journal I saw a few articles referencing how the Federal Reserve will act in response to the labored movement of the economy. The latest guess from the WSJ included data based on the September jobs data. September’s data reported that the private sector added 64,000 jobs last month but still cut government staffing by 159,000, leaving an estimated loss of jobs around 95,000. The net loss of 95,000 jobs and the stagnant unemployment rate (9.6%!) leads economists to believe that the Fed will more than certainly intervene in the market. The latest assumption is that the Federal Reserve will take a monetary stand by injecting a stimulus into the economy that could come in the form of purchasing assets like Treasury bonds.

I’m not a Milton Friedman or John Keynes of economics but I think my confusion is still warranted. How would an expansionary policy create more jobs when interest rates are at bottom of the barrel now anyway? Certainly I understand that more lending creates more spending in the economy which promotes growth and more jobs, however the ability to borrow alone doesn’t create ease in the mind of the consumers/employees, especially after the mortgage crisis and the upcoming tax conundrum.

If the Fed wants to really kick start this doomed for double dipping economy they need to really look at the long term objectives and leave the short term money supply theories in the dust with the rest of the economy that tanked for the past 2 years.

Certainly someone at the Fed has had to of thought of the long term effects of lowering the interest rates even more, what happens when inflation hits an all-time high? The economy can barely afford what its consuming now let alone when inflation kicks in and employers won’t be able to make up the difference in employees pay checks.

And who’s to forget that lingering pest, the National Debt? Government borrowing money from itself to inject into the economy can be looked at 2 ways, as an asset or a liability and at this stage in the game with over $13 trillion in debt it’s really anyone’s guess as to which it really is. What I am certain of is that adding onto our nation’s debt by injecting a short term solution is not a leap forward like many of us had hoped to see.
Share To:

Jen Street

Post A Comment:

0 comments so far,add yours