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Federal Reserve won't help, won't explain why

bernankefombc.jpg

As expected, the Federal Reserve's Open Market Committee met today, and decided against doing anything further to stimulate the economy. But it's worth reading their news release explaining -- or, more accurately, not explaining -- why.

Paragraph one: Everything is terrible. "The pace of recovery in output and employment has slowed in recent months. Household spending is increasing gradually, but remains constrained by high unemployment, modest income growth, lower housing wealth, and tight credit. Business spending on equipment and software is rising, though less rapidly than earlier in the year, while investment in nonresidential structures continues to be weak. Employers remain reluctant to add to payrolls. Housing starts are at a depressed level. Bank lending has continued to contract, but at a reduced rate in recent months."

Paragraph two: We admit everything is terrible. In fact, it's so terrible that it means we're failing our mandate. "Measures of underlying inflation are currently at levels somewhat below those the Committee judges most consistent, over the longer run, with its mandate to promote maximum employment and price stability. With substantial resource slack continuing to restrain cost pressures and longer-term inflation expectations stable, inflation is likely to remain subdued for some time before rising to levels the Committee considers consistent with its mandate."

Paragraph three: We're not going to do anything further to improve the economy. "The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and continues to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends, and stable inflation expectations, are likely to warrant exceptionally low levels for the federal funds rate for an extended period. The Committee also will maintain its existing policy of reinvesting principal payments from its securities holdings."

Paragraph four: But that doesn't mean we won't do more at some future date. "The Committee will continue to monitor the economic outlook and financial developments and is prepared to provide additional accommodation if needed to support the economic recovery and to return inflation, over time, to levels consistent with its mandate."

Logically, this does make sense. The Federal Reserve believes that economic conditions are so grim that they're not fulfilling their mandate. They believe that is more they can do, and they warn they might do it soon. Just not yet.

Photo credit: By Manuel Balce Ceneta/Associated Press

By Ezra Klein  | September 21, 2010; 3:02 PM ET
Categories:  Federal Reserve  
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Comments


Congrats to Ezra ...The bullshit filter is working well .When I have properties in Scottsdale Arizona appraised at 4 million in 2007 and a current appraisel of less than half a million today and paid 860000 in 2000 something is not right. I believe it is a race to the bottom

Posted by: grantwilliams01 | September 21, 2010 3:48 PM | Report abuse

What else can they do? Rates are near zero, and the Fed's balance sheet is stuff with drek offloaded by the mortgage industry. They may flood the system with more cash, but consumers, municipalities, and small business is already burdened with too much debt and simply won't spend it.

Posted by: bgmma50 | September 21, 2010 4:05 PM | Report abuse

The Fed has nothing to do ... Financial companies that control the "cartel" have been bailed out ... as a thank you note for all the tax payers and the unemployment on main-street ... you guys sort it out amongst yourself and decide who can afford to buy bread for dinner tonight.

Posted by: free_np | September 21, 2010 4:09 PM | Report abuse

By the way, Bernanke has been warning the government about debts and deficits. Maybe he's decided not to further enable its addiction to spending money it doesn't have.

Posted by: bgmma50 | September 21, 2010 4:10 PM | Report abuse

Abolish the fed.

It is unconstitutional.

It is probably the source of most of our recessions since it was created.

It is stealing trillions of of US dollars and funneling them to unknown people, organizations and foreign countries.

Posted by: lauren2010 | September 21, 2010 4:18 PM | Report abuse

@ bgmma50 Maybe they should have a bake sale?

Posted by: Kego | September 21, 2010 4:21 PM | Report abuse

Why won't the Fed help the economy?

Because Democrats are in power and poised to get whupped over the economy.

Didn't someone do a paper on this with charts and graphs showing the Fed takes much less aggressive action during Democratic administrations than GOP ones?

Who cares if unemployed people suffer during Democratic administrations?

Posted by: dplionis | September 21, 2010 4:27 PM | Report abuse

dplionis:
You are correct. I wish I could find a link to that paper. I don't have time right now but will try later.

Posted by: Calvin_Jones_and_the_13th_Apostle | September 21, 2010 4:33 PM | Report abuse

Ahhh, the good ol' doublespeak shuffle! Of course this is to simultaneously appease markets without actually having to do anything...

I wonder if Mr. Bernanke engages in doublethink, too...

Posted by: will12 | September 21, 2010 4:46 PM | Report abuse

Here you go, dplionis:
http://utip.gov.utexas.edu/papers/utip_42.pdf

Or, if you don't want to read the whole 47 pages, here's a blog post about it:
http://rortybomb.wordpress.com/2010/08/18/back-does-the-federal-reserve-simply-not-like-democrats/

Posted by: KarenJG | September 21, 2010 4:53 PM | Report abuse

The Fed has already done a lot and has little to show for it in terms of real economic affects (not counting bailing out cronies here). They now have weak credibility as an actor able to "make things right in the economy". When they act again in a major way, and they will eventually have to, if it has little effect then their ability to meaningfully stimulate the real economy will be fully discredited (in the current circumstances). This loss of faith would have extremely negative economic consequences, particularly in financial markets. Thus, the Fed is not anxious to risk being revealed as impotent with hasty action not calculated to have a strong "shock and awe" component. So they wait and see and hope they don't have to take extreme action again in the face of increasing economic softness. This would be fairly obvious to you, Ezra, if you were capable of assessing the economy outside the requirements of democratic talking points. What does that mean? It means today you bemoan the lack of Fed action because the economy is so bad, but tomorrow you will probably be off pseudo-campaigning with a "things aren't so bad" vote for incumbent Dems spin on MSNBC or something like that. Constant spinning dulls the ability to assess things on the weight of evidence. the Fed is not acting now because they feel with limited credibility and ammo to they need to pick their spot with more care than what suits election cycle politics.

Posted by: mrnegative | September 21, 2010 5:03 PM | Report abuse

I'm still amazed Obama renominated Bernanke. Of all the fricking places folks needed to see a little change they could believe in. Instead they got Bush's guy along with Timmeh, a guy already failing to patrol Wall Street, and then to make it a trifecta why not bring back the guy who helped deregulate the mess in the first place and has since bankrupt Harvard? How could that not work out?

Posted by: Bullsmith1 | September 21, 2010 5:17 PM | Report abuse

"What else can they do? Rates are near zero, and the Fed's balance sheet is stuff with drek offloaded by the mortgage industry."

They could buy long-term gov't securities, publicly commit to many years of higher inflation, stop paying interest on excess reserves, etc.

"Abolish the fed...It is probably the source of most of our recessions since it was created."

America did not have a central bank between 1837 and 1913. Let's list the recessions the US had during that 70 year time frame:

1836–1838, late 1839–late 1843, 1845–late 1846, 1847–48 recession, 1853–54 recession, Panic of 1857, 1860–61 recession, 1865–67 recession, 1869–70 recession, Panic of 1873 and the Long Depression 1873-79, 1882–85 recession, 1887–88 recession, 1890–91 recession, Panic of 1893, Panic of 1896, 1899–1900 recession, 1902–04 recession, Panic of 1907, Panic of 1910–1911, and finally, the recession that was already underway when the Federal Reserve Act was signed into law: Recession of 1913–1914.

Alternatively, you can look here:
http://www.nber.org/cycles.html

Posted by: Nylund154 | September 21, 2010 5:23 PM | Report abuse

Well....Ezra, accuse them of being racists.

Posted by: WhiteHonkey | September 21, 2010 5:56 PM | Report abuse

The reason why is likely because their current actions are already beyond anything the Fed has ever done before. They likely realize that there is already a large risk of difficulty in unwinding the actions that they have already taken. Even more extreme new actions have little prospect of doing anything more than adding even more risk to that already large risk. There are at least three reasons why they don't want to say why. One is simply that there is nothing but negative value in anything negative that they might say. So they certainly don't want to admit the limits of their options. Second, they are not achieving their mandate to maintain employment and they certainly don't want to admit that. Third, it is always possible that conditions could get so bad that they have no choice but some additional actions no matter what the risk. They certainly don't want to say anything that would limit their options for framing any future actions as positively as possible.

Posted by: dnjake | September 21, 2010 6:12 PM | Report abuse

Why are you blaming the Fed? Congress and the Administration should be taking the lead on any stimulus measures. Did FDR wait for the Fed to act? The Fed will act--after the elections--but the problem with our economy is lack of demand by the average American, and the Fed can't do much about that. The Fed will start to buy more longer-term Treasurys, but the ball is really in Congress and Obama's court. Don't expect to much from either...except for them to find someway to blame Bernanke and the Fed for their failures.

Posted by: dc_observer | September 21, 2010 6:52 PM | Report abuse

Ezra - dplionis nailed it. If Republicans win the Congress watch how fast the Fed starts helping, so Republicans can claim that their policies worked.

Posted by: davej3 | September 21, 2010 7:01 PM | Report abuse

The FED exists to create recessions and depressions and profit from them by buying businesses, property, etc. at the bottom when their value has been destroyed, and to add insult to injury, pay for it with FED debt dollars that are worth zilch.

The recessions provoked before the FED was created were all the result of ferocious manipulations by the Cartel in London, through "traitor" banks in America to STOP America creating its own money WITHOUT paying private bankers to do so.

Lincoln started this by creating Silver Certificate Green Back Dollars, and paying for the Civil War with them, after refusing
to pay the European Cartel 36% interest to borrow the money for the war from them. They swore revenge, and achieved it with the creation of the FED, in 1913-14. It was their 4th effort to create a privately owned Central Bank in America. We successfully thwarted all previous attempts
by refusing to renew their 20 year Charters.

Here is what the FED is and does.

The FED is a privately owned corporation consisting of about a dozen member Family Banks. Half of them are European, so our monetary policy is NOT controlled in America. The FED charges us fantastic sums to create, print and distribute absolutely worthless paper money called, "Federal Reserve Notes."

The Banks who own the Federal Reserve, create and print up 98% of all the money distributed, the Treasury, 2% only

For the results of a House Investigation into Banking in America and the FED, see : [ http://www.save-a-patriot.org/files/view/whofed.html ] This investigation named a number of those Banking Families Here are their names, and others from other sources.

Rothschild Bank of London; Warburg Bank of Hamburg; Rothschild Bank of Berlin; Lehman Brothers of New York; Lazard Brothers of Paris; Kuhn Loeb Bank of New York; Israel Moses Seif Banks of Italy; Goldman, Sachs of New York; Warburg Bank of Amsterdam; Chase Manhattan Bank of New York (Rockefellers)

Federal Reserve Note dollars are created using a criminal moneylenders trick, at least 400 years old, called Fractional Reserve Lending. (see "Money As Debt" at : [ http://www.youtube.com/watch?v=vVkFb26u9g8 ] or read a short explanation at : [ http://www.themoneymasters.com/faqs/ ]
An example of Fractional Reserve Lending : The FED Family Banks "purchase" electronically 1 million dollars in Bonds from the Treasury. They are then allowed to print up 9 million more dollars of valueless money, and loan this out for REAL interest. OR buy other Banks with it. OR buy General Electric and General Motors with it, which they have actually done. Through proxies and "investment funds", they now own the majority of the biggest corporations in America. And they got them for FREE, buying them with valueless money, they printed up themselves, for the price of the paper.

Please note that the Stimulus and the Bailout funds were both paid to the Banks who own the FED and printed up, out of thin air, by them, for free.


Posted by: vcompton1 | September 21, 2010 7:14 PM | Report abuse

"They could buy long-term gov't securities," posted by Nylund 154

Ummm they're already doing that. Like I said, Bernanke has been warning about deficits and debt, and nobody in the administration or Congress seem to be listening. If he turns off the spigots for a while, perhaps they will.

"publicly commit to many years of higher inflation,"

Even if they could make good on that, why would they want to?

"stop paying interest on excess reserves, etc."

The topic is what they more they should be doing to help, not what they already are doing that's not working.

Posted by: bgmma50 | September 21, 2010 7:34 PM | Report abuse

I HOPE EVERYONE HERE LISTENS TO WHAT VCOMPTON1 IS SAYING! He's absolutely right about the Federal Reserve. It's no more federal than Federal Express. Its existence means that WE BORROW OUR MONEY INTO EXISTENCE AS DEBT.

Paying back the debt would require pulling the 98% of our money which are Fed Reserve Notes out of circulation to pay the debt. AND THAT ONLY COVERS THE PRINCIPAL!

The Fed is the BIGGEST PONZI SCHEME IN EXISTENCE, as we have to BORROW MORE MONEY TO PAY THE INTEREST ON BORROWED MONEY!

Yes, I'm yelling! Not enough people understand the scam that is the federal reserve system! The USA has done just fine without a central bank, and this country USED TO PRINT MONEY NOT BASED ON DEBT!

We can do it again! CONGRESS MUST END ITS OUTSOURCING OF $$ POLICY TO PRIVATE BANKS!

WE CAN PRINT ALL THE MONEY WE NEED-DEBT FREE.

However, the politicians are beholden to the power of Wall Street and the banks, WHO ALSO CONTROL THE MEDIA BY THE LOANS THEY PROVIDE AND THE SHARES THEY OWN.

Watch on YOUTUBE:
- THE MONEY MASTERS
- MONEY AS DEBT
- THE SECRET OF OZ

Discover what the banks don't want you to know about their influence over world governments!

These are just the facts, people. Research it for yourselves, and VOTE THIS NOVEMBER BASED ON WHAT THE CANDIDATES WILL DO ABOUT $$ POLICY AND THE FED.

Posted by: akitadog | September 21, 2010 7:47 PM | Report abuse

Posted by: vcompton1 | September 21, 2010 7:14 PM

"An example of Fractional Reserve Lending : The FED Family Banks "purchase" electronically 1 million dollars in Bonds from the Treasury. They are then allowed to print up 9 million more dollars of valueless money, and loan this out for REAL interest. OR buy other Banks with it. OR buy General Electric and General Motors with it, which they have actually done. Through proxies and "investment funds", they now own the majority of the biggest corporations in America. And they got them for FREE, buying them with valueless money, they printed up themselves, for the price of the paper."
-----------------------

While ignoring the rest your conspiracy theory, I will point out that this is inaccurate. "Banks" do NOT have the legal right to print money. Really dumb...

Posted by: michael4 | September 21, 2010 7:59 PM | Report abuse

"They could buy long-term gov't securities," posted by Nylund 154

Ummm they're already doing that. Like I said, Bernanke has been warning about deficits and debt, and nobody in the administration or Congress seem to be listening. If he turns off the spigots for a while, perhaps they will.

Posted by: bgmma50 | September 21, 2010 7:34 PM

------------------------------
Gee, no one else knows about the deficit and debt but you and Bernanke? Get real. Do you want to stimulate the economy/create jobs OR cut the deficit/debt? You can't do both at the same time, you know? Anyone with any understanding of economics realizes that the short-term issue needs to be dealt with in the short term, and the long-term will have to wait.

Unless people get to work and stop drawing on govt resources and start contributing to them we're in for a much longer slog than we might care to imagine. And that, of course, doesn't mention the personal suffering of families out of work.

Posted by: michael4 | September 21, 2010 8:13 PM | Report abuse

If deflation had a cure, do you really believe Japan would still be mired in it after two decades?

Posted by: slim2 | September 21, 2010 8:47 PM | Report abuse

WE-the-People; Our' Children & Grand-Children,- will ALL $Pay for the Criminal USURY $DEBT Created by the Globalist THUGS- called the FEDERAL RESERVE BANK!! -- -- The G-20 work for the Banking Cartel Families that own our FED and all the Central Banks in Europe.

All they have to do to cure the crisis is do away with "fractional reserve lending" in the creation of the Dollar, Euro, Pound, etc.

There is only a crisis because the money is false, and they print up as much as they want whenever they want.

Here is how the scam works at our FED, which is a carbon copy structurally, of the European Central Banks.

The FED is a privately owned corporation consisting of about a dozen member Family Banks. Half of them are European, so our monetary policy is NOT controlled in America. The FED charges us fantastic sums to create, print and distribute absolutely worthless paper money called, "Federal Reserve Notes."

The Banks who own the Federal Reserve, create and print up 98% of all the money distributed.

For the results of a House Investigation into Banking in America and the FED, see : [ http://www.save-a-patriot.org/files/view/whofed.html ] A number of the Banking Families that own the FED are named. Here are their names, and others from other sources.

Rothschild Bank of London; Warburg Bank of Hamburg; Rothschild Bank of Berlin; Lehman Brothers of New York; Lazard Brothers of Paris; Kuhn Loeb Bank of New York; Israel Moses Seif Banks of Italy; Goldman, Sachs of New York; Warburg Bank of Amsterdam; Chase Manhattan Bank of New York (Rockefellers)

Federal Reserve Note dollars are created using a criminal moneylenders trick, at least 400 years old, called Fractional Reserve Lending.
(see "Money As Debt" at : [ http://www.youtube.com/watch?v=vVkFb26u9g8 ]
or read a short explanation at : [ http://www.themoneymasters.com/faqs.htm ] Look for it on Bing.com, or YouTube. Google has banned the site and will not send you there.

An example of Fractional Reserve Lending : The FED Family Banks "purchase" electronically 1 million dollars in Bonds from the Treasury. They are then allowed to print up 9 million more dollars of valueless money, and loan this out for REAL interest. OR buy other Banks with it. OR buy General Electric and General Motors with it, which they have actually done. Through proxies and "investment funds", they now own the majority of the biggest corporations in America. And they got them for FREE, buying them with valueless money, they printed up themselves, for the price of the paper.

Under the FED charter, no audit can ever be made. The names of the member family banks can never be revealed. The profit of the corporation, the interest on the (entirely fictional) national debt can never be taxed. It amounted to 172 Billion Dollars in 2007. With the Stimulus and Bailout it may reach 5 times that amount in 2010.

Please note that the Stimulus and the Bailout funds were both paid to the Banks who own the FED .

Posted by: jward52 | September 21, 2010 8:58 PM | Report abuse

"Gee, no one else knows about the deficit and debt but you and Bernanke?" posted by Michael4

Lots of people know. They just don't happen to inhabit Congress or the White House at the moment.

"Do you want to stimulate the economy/create jobs OR cut the deficit/debt?"

How's that stimulus/job creation thing working so far?

"Anyone with any understanding of economics realizes that the short-term issue needs to be dealt with in the short term, and the long-term will have to wait."

Anyone who can see past the end of his nose can see that the sort term solutions achieved thus far at a cost of a trillion and counting have solved nothing, but have greatly exacerbated the long term problems.


"Unless people get to work and stop drawing on govt resources and start contributing to them we're in for a much longer slog than we might care to imagine"

That's true. And if we continue to throw hundreds of billions at the problem in the hope that something sticks and nothing does, than the slog will be even longer than that.

Posted by: bgmma50 | September 21, 2010 11:07 PM | Report abuse


Looking for a job? Jobs are now opening at many of the following locations http://bit.ly/aCgJH5

Posted by: derrickjay | September 22, 2010 3:33 AM | Report abuse

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