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Fed shows openness to new steps to boost economy, but takes no action

By Neil Irwin
Federal Reserve Board officials on Tuesday decided not to take new steps to try to boost the economy. But they suggested that could change in the months ahead.

The Fed "is prepared to provide additional accommodation if needed to support the economic recovery and return inflation, over time, to levels consistent with its mandate," the central bank's policymaking committee said after a closed-door meeting. That indicates that the Fed will seriously consider unconventional measures to encourage growth at its next meeting, such as pumping money into the economy by buying vast quantities of bonds.

The Fed leaders' assessment of the economy itself was little changed from that of its last policy meeting on Aug. 10; it affirmed that "the pace of recovery in output and employment has slowed in recent months."

But the Fed leaders expressed stronger concern than they had in August that inflation is too low.

"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," said the statement from the Federal Open Market Committee.

Consumer prices rose 1.2 percent in the year that ended in August, the Labor Department said Friday, and only 0.9 percent when volatile food and energy prices are excluded. Fed leaders aim for inflation to be in the 1.5 to 2 percent range. Somewhat higher inflation would benefit the economy by giving businesses and consumers greater incentive to spend and by reducing the burden of debts.

The Fed, as was widely expected, maintained its target for short-term interest rates near zero, where it has been since December 2008, and restated its expectations that rates will stay "exceptionally low" for an extended period.

The economic recovery has slowed in recent months, with overall U.S. growth coming in at only 1.6 percent in the second quarter and forecast to rise by a similarly tepid pace in the third. If growth persists at such low levels, the unemployment rate not only won't come down, but could rise further.

Federal Reserve officials have been weighing less conventional options for how to combat the problem. Fed Chairman Ben S. Bernanke spelled out those options in a speech in late August, arguing that the central bank must weigh the costs of these steps against their benefits.

Bernanke mentioned buying hundreds of billions of dollars in bonds, a strategy known as "quantitative easing." Other options included cutting an interest rate the Fed pays on bank reserves and pledging to keep short-term interest rates low for even longer than the "extended period."

Fed leaders will likely spend the coming weeks researching and considering those options, setting the stage for a potential decision on quantitative easing and other steps at their next meeting, Nov. 2-3.

One Fed official, Kansas City Fed President Thomas Hoenig, dissented from the decision, arguing as he has at every meeting this year that interest rates need not stay low for an extended period.

By Neil Irwin  | September 21, 2010; 2:46 PM ET
Categories:  Federal Reserve  
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Comments

If the Fed cuts me a check for a mere $5 million, I will promise to plow it right back into the economy in the form of fancy cars, tailored suits, paint balls, helicopter rides, and paying landscapers to fix celebratory donuts on the front lawn. This is a tiny fraction of former stimulus plans, and will create or save several hundred jobs from manufacturing to, let's be honest, lots of law enforcement. It's a win, win, win, tie, win situation for America.

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

Our economy is toast one way or another, sooner or later because we are facing learning how to live within the means of our planet and the monopolistic free market of ultra-super-rich economic model is helpless in the face of it but will not give up short term quick profits... so the lesson is going to be the hard way...

Posted by: Wildthing1 | September 21, 2010 3:28 PM | Report abuse

We all know what will work.

Same thing that worked for the Great Depression.

TRUST BUSTING of the Too Big To Fail banks. This frees up capital to small business loans, and 90 percent of all US job growth is ALWAYS from small business. Most small business owners make maybe $50,000 a year.

Actions, Mr. President. Not words. Actions.

Posted by: WillSeattle | September 21, 2010 3:33 PM | Report abuse

Damn idiots running our country ! Stop giving free hand outs. America needs jobs you stupid fools!

Posted by: JWTX | September 21, 2010 3:37 PM | Report abuse

The recession is over. If monetary policy worked, the Fed would already be in the process of normalizing the extreme policies it used in an attempt to control an extreme financial crisis. The Fed is not meeting its mandates. So, they have no choice other than considering new actions. Unfortunately, the problem is the mandates. Monetary policy has been successful in meeting them only during booms when monetary policy was not needed. Monetary policy did not end the Great Depression. It may have at least helped in finally ending the inflation of the 1970's. But that was only after a decade of mistakes and it was just another case of very extreme policies restraining a feedback loop. The Fed's record since 2000 strongly suggests that it can't normalize even its current extreme policies without causing another financial crash of some kind. More extreme financial policies are just going to make that crash worse when it comes.

Posted by: dnjake | September 21, 2010 3:52 PM | Report abuse

Those are words I love to hear -- "Fed takes no action". Their prognostications and subsequent actions have proven to be nothing short of disastrous for taxpayers in this country.

Now if only Congress and Obama administration would do the same...

Posted by: revolver | September 21, 2010 4:04 PM | Report abuse

Yes, the Fed keeps loaning money to big banks for zero interest and they keep buying Treasury Bonds that taxpayers have to pay interest on to the corporations. Money keeps circulating between the Fed and big banks, taxpayers keep paying the interest to them, and no money gets circulated in the economy. Great plan to keep sucking taxpayers and draining every last penny they have left.

Posted by: clairevb | September 21, 2010 4:11 PM | Report abuse

Is there a group or agenda out to purposely destroy this country?

What is hovering and waiting in the wings to pounce and thus control this purposely created void and our country?

Posted by: Anonymous | September 21, 2010 4:25 PM | Report abuse

Socialists can run an economy into the ground better than anyone I know thank god I bought silver instead of stocks.

Posted by: Anonymous | September 21, 2010 4:37 PM | Report abuse

The Fed risks the role of being like firefighters who stand by the city and watch it burn to the ground.

While too much intervention can be harmful not enough seems to be evident in today's economy.

Posted by: Anonymous | September 21, 2010 4:38 PM | Report abuse

Trillions of dollars of equity lost, millions of jobs lost, millions of homes lost, trillions added to the debt. Trillions given away to criminal bankers. ZERO investigations, ZERO prosecutions, ZERO responsibility. Thats the FED!
Bernanke hired a former Enron lobbyist to grease the wheels in Congress so that Americans can continue to be screwed by an unbeholden, unaccountable, unelected central bank
www.auditthefed.com

Posted by: Anonymous | September 21, 2010 4:43 PM | Report abuse

THE BONDS,ASSETS PURCHASES MUST BE CAREFULLY TO BE sure that it wikll not have negative results about inflation.unemployment.

Posted by: hlmelsaid761 | September 21, 2010 5:07 PM | Report abuse

Judging from the preceding posts, we are distraught, and too angry, angry, angry for words.

Words of doom may be appropriate here - it's just that the minutes of the FOMC hardly seems the appropriate trigger.

Posted by: Anonymous | September 21, 2010 5:45 PM | Report abuse

Printing EVEN more money won't solve a thing.
I never has and never will. It just sets us up for huge inflation. You DO know what happens over time when inflation exceeds the gov't published CPI (which is has for decades)? Wages rise rise (but dollar buying power is diluted just as fast) and you eventually get tax bracket creep. YOU pay more of your real money in taxes but have less buying power. It's a GAME. You are the pieces on the board. NOT the player.

Posted by: illogicbuster | September 21, 2010 6:30 PM | Report abuse

But, Why is The Anti-Christ Obama Destroying America. If you truly want to know what is going on; Then you will have to accept these things as the TRUTH. Once you understand the following things; All things will be understood. So I tell you Obama is Satan on Earth, Lawless One, or what ever else you want to call this Demonic Figure. His words describe him, He is a False Hope, If you listen to him you will love him. He carries a Bow without an Arrow. He will conquer all through his speech, his false hoods will capture all who sit and listen to him.
2 Thessalonians 2:11-12
11And for this reason God will send them strong delusion, that they should believe the lie, 12 that they all may be condemned who did not believe the truth but had pleasure in unrighteousness.

Posted by: makom | September 21, 2010 6:47 PM | Report abuse

More dithering and half-measures. If Pres. Obama and the Fed came out with concrete, clear, and comprehensible-to-the-average-Joe-Taxpayer plans, the economy would start moving. As it is, no one's sure what our Byzantine tax code will look like next year, no one knows what Wall Street "reform" really entails, and the unintended consequences of the health care "reform" have yet to play out. Is it any wonder everyone's hunkering down?

Posted by: srpinpgh | September 21, 2010 6:49 PM | Report abuse


US Government ‘Hiding True Amount of Debt’

Sept. 21, 2010


THE actual figure of the US’ national debt is much higher than the official sum of $US13.4 trillion given by the Congressional Budget Office, according to analysts cited on Sunday by the New York Post.

“The Government is lying about the amount of debt. It is engaging in Enron accounting,” said Laurence Kotlikoff, an economist at Boston University and co-author of The Coming Generational Storm: What You Need to Know about America’s Economic Future.

“The problem is we’re seeing an explosion in spending,” added Andrew Moylan, director of government affairs for the National Taxpayers Union.

In 1980, the debt - the accumulated red ink incurred by the Federal Government - was $US909 billion.

This represented some 33 per cent of gross domestic product, according to the Congressional Budget Office (CBO).

Thirty years later, based on this year’s second-quarter numbers, the CBO said the debt was $US13.4 trillion, or 92 per cent of GDP.

The CBO estimates the debt will be at $US16.5 trillion in two years, or 100.6 per cent of GDP.

But these numbers are incomplete.

They do not count off-budget obligations such as required spending for Social Security and Medicare, whose programs represent a balloon payment for the Government as more Americans retire and collect benefits.

In the case of Social Security, beginning in 2016, the US Government will be paying out more than it is collecting in taxes.

Without basic measures - such as payment cuts or higher payroll taxes - the system could be on the road to bankruptcy, according to officials.

“Without changes,” wrote Social Security Commissioner Michael Astrue, “by 2037 the Social Security Trust Fund will be exhausted. There will be enough money only to pay about $US0.76 for each dollar of benefits.”

Mr Kotlikoff and Mr Moylan agree US national debt is much more than the official $US13.4 trillion number, but they disagree over how to add up the exact number.

Mr Kotlikoff says the debt is actually $US200 trillion.

Mr Moylan says the number is likely about $US60 trillion.

That is close to the figure quoted by David Walker, the US Comptroller General from 1998 to 2008.

He launched a campaign to convince Americans that the federal spending and debt is a greater threat than terrorism.

But whichever figure is accurate, all three agree that the problem has worsened in the last few years.

They say it is because Congress and the Administration, whether Republican or Democrat, consistently overspend.

Source: Australian News, story by Gregory Bresiger


--------------

Does anyone really comprehend what $200 TRILLION in debt means? That is 3 times the entire currency wealth of the world. In other words, the United States has spent in RED INK more than 3 times ALL the money in the world.

Posted by: Anonymous | September 21, 2010 6:50 PM | Report abuse

Real facts!

The day the democrats took over was
>not January 22nd 2009 it was actually January 3rd 2007 the day the Democrats took over the House of Representatives and
>the Senate, the start of the 110th Congress. The Democratic Party controlled a majority in both chambers
>for the first time since the end of the 103rd Congress in 1995.

For those who are listening
>to the liberals propagating the fallacy that everything is "Bush's Fault",
>think about this:
>
>January 3rd, 2007 was the day the Democrats took over the Senate and the Congress:
>
>At the time:
>
>The DOW Jones closed at 12,621.77
>
>The GDP for the previous quarter was 3.5%
>
>The Unemployment rate was 4.6%
>
>George Bush's Economic policies SET A RECORD of 52 STRAIGHT MONTHS of
>JOB CREATION!
>
>Remember the day...
>January 3rd, 2007 was the day that Barney Frank took over the House Financial
>Services Committee and Chris Dodd took over the Senate Banking Committee.
>
>The economic meltdown that happened 15 months later was in what part of the
> economy?
>BANKING AND FINANCIAL SERVICES!!!
>
>THANK YOU DEMOCRATS for taking us from 13,000 DOW, 3.5 GDP and 4.6% Unemployment...
>to this CRISIS by (among MANY other things) dumping 5-6 TRILLION Dollars of toxic
>loans on the economy from YOUR Fannie Mae and Freddie Mac FIASCOS! (BTW: Bush asked Congress 17 TIMES to stop Fannie & Freddie - starting in
>2001 because it was financially risky for the US economy).
>
>And who took the THIRD highest pay-off
> from Fannie Mae AND Freddie Mac????
>
>OBAMA

And who fought against reform of
>Fannie and Freddie???
>
>OBAMA and the Democratic Congress
>
>So when some one tries to blame
> Bush...
>
>REMEMBER JANUARY 3rd, 2007.... THE DAY THE DEMOCRATS TOOK OVER!" Bush may have been in the car but the Democrats were in charge
>of the gas pedal and steering wheel they were driving.

Set the record straight on Bush!


>"It's not that liberals aren't smart,
>it's just that so much of what they know isn't so" -Ronald Reagan

Posted by: Jimbo77 | September 21, 2010 7:12 PM | Report abuse

"wait and see" WHAT???? Wait and see another 17 years of Republicans demonstrating how hypocrical and destructive they can be?

I say vote in November and run all of them out on a rail. Enough is enough. Make it so they can't fillibuster - I am so tired of these hacks and their idiotic willfully ignorant morons who shout down town hall meetings and carry signs that are an embarrassment to our country.

They never even bothered to read the newspaper in 2008 when our country took a dramatic downturn. They didn't even NOTICE what happened in December of that year. The only reason they're "outraged" nowadays is pretty obvious. What a bunch of shameful bigots - I'm sick of these John Birch Society Republicans, Roger Ailes, and the bigots.

They blithely give a "thumbs down" to our men and women who serve and then proclaim themselves as patriotic? Fire THEM.

VOTE THEM OUT.

Posted by: redjanuko | September 21, 2010 7:40 PM | Report abuse

YOU WANT SOME *REAL* FACTS, BIMBO?

UNDER OBAMA:

1. Signed the Matthew Shepard Hate Crimes Bill.

2. Negotiated deal with Swiss banks to permit US government to gain access to records of tax evaders.

3. Shut down offshore tax safe havens.

4. Ended the previous policy of offering tax benefits to corporations who outsource American jobs.

5. Ended the practice of protecting credit card cos; in place of it are new consumer and small business protections from credit card industry’s predatory practices and excessive surcharges.

6. Made more loans available to small businesses through community banks.

7. Ended the previous practice of forbidding Medicare from negotiating with drug manufacturers for less expensive drugs, thus bringing the medicare expenses down and lowering prescription drug costs for senior citizens.

8. Phased out the expensive F-22 war plane and other outmoded weapons systems that weren’t even used or needed in Iraq/Afghanistan, thereby saving the country billions. The cost of production of ONLY ONE F-22 was around $138 MILLION.

9. Ended the previous stop-loss policy that kept soldiers doing tour after tour after tour of duty in Iraq and Afghanistan longer than their enlistment date.

10. Cover expenses of families of fallen soldiers so they may be on hand when the body arrives at Dover AFB.

11. Improved housing for military personnel and initiated a new policy to promote federal hiring of military spouses.

12. Improved conditions at Walter Reed Military Hospital and other military hospitals.

13. Initiated a housing rescue plan, thereby keeping thousands upon thousands of families from losing their homes.

14. Returned money authorized for refurbishment of White House offices and private living quarters and paid for redecoration of the White House living quarters out of his own pocket.

15. Lowered federal income tax for the middle class. (was at its lowest in 60 years when the Tea Party decided it would be a "brilliant idea" to rally on April 15.)

16. The USA is once again in compliance with the Geneva Convention - which not only restored our integrity and standing worldwide but also helped our soldiers.

17. Visited more countries & met with more world leaders than any president in his first 6 months in office.

18. Ordered all federal agencies to undertake a study and make recommendations for ways to cut spending.

19. Brought high-speed broadband internet to K-12 schools.

20. Expanded the SCHIP program to cover health care to 4 million more kids.

21. Appointed Michael R. Bromwich, former Assistant US Atty and Justice Department Inspector General, to head the MMS, to reorganize it, and to eliminate conflicts.

22. Expanded the National Youth Service Program.

23. Ended previous policy of awarding "no-bid" contracts.

24. Signed the Omnibus Public Lands Protection Act, protecting 200 million acres of wilderness and a thousand miles of rivers.

http://www.nature.org/pressroom/press/press3952.html

25. Steered us from t

Posted by: redjanuko | September 21, 2010 7:44 PM | Report abuse

Capitalism for Dummies-

a primer for team obama

Question: if a worker is unemployed, how much payroll taxes (social secuirty and medicare) does team obama get from the usual greedy capitalist pig employers who exploit the poor?

Answer: that be ZERO

Question: how much does team obama lose for each unemplyed worker?

Answer: their unemployment check, food stamps etc

Question: if team obama ABOLISHED payroll taxes for a year, would employment increase and americans get back to work??

Obama’s Answer: yes,

but see that would benefit the greedy capitalist pigs who are the employers, many of whom must abuse the poor as they make over $250,000 and must be punished, so NO
cut of payroll taxes

Question: has a Payroll Tax Holiday ever been tried?

Obama’s Answer–Every day, fool. Just go to Home Depot and Lowes, do you think any of the illegals are paying payroll taxes??

But no payroll tax holiday for Americans, suckers...........

Posted by: Anonymous | September 21, 2010 7:48 PM | Report abuse

1. Steered us from a free falling economic disaster.

The Gramm-Leach-Bliley Act, formed by 3 Republicans and enacted when they held a majority in both the House and the Senate, not only allowed investment firms, insurance brokers and commercial banks to consolidate but allowed the newly-merged banks to take on riskier investments while at the same time removing any regulations requiring them to maintain enough equity, exposing the assets of its customers.

Bimbo thinks he can blame the banks collapsing and the mortgage meltdown on poor people.

if you can't find any other reason then vote for this reason: Vote to forfeit Bimbo's vote.

Posted by: redjanuko | September 21, 2010 7:48 PM | Report abuse

Wait and see...

Isn't that what they have been doing since 43's minions ran the interest rate down to near zero?

Are they trying to tell us, quietly mind you, that GOP fiscal policy broke the bank?

Posted by: Anonymous | September 21, 2010 8:55 PM | Report abuse

It's over the dollar will collapse. Greenspan said in front of the CFR that "Fiat currency has NO place to go but gold" This has not been a big story, but it is the bombshell that our Dollar is finished. Welcome to the nightmare.

Posted by: lastchanceeexit | September 22, 2010 11:54 AM | Report abuse

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