Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : Liberalism: Do You Agree We've Had Enough of It? -- Ignore unavailable to you. Want to Upgrade?

To: chartseer who wrote (113920)	9/27/2011 7:47:42 AM
From: Hope Praytochange	2 Recommendations Respond to of 224750

--Fed's twisting long-term interest rates lower won't help stimulate economy --Using monetary policy without aid of fiscal policy unlikely to help --Fed should relax scrutiny over bank loans and capital By Irwin Kellner A DOW JONES COLUMN The Federal Reserve's latest gambit to stimulate the economy by twisting long- term interest rates lower will not accomplish its objective. Using monetary policy alone, without the aid of fiscal policy to jump-start the economy, is like trying to push on a string. In today's context, it makes even less sense. Long rates are already at multi-decade lows, so pushing them even lower is not going to make much difference. Most people are so worried about their jobs that they are trying to reduce their debts and increase their savings. Those that want to borrow to buy a home are finding that the banks are reluctant to give them a mortgage. For their part, many businesses have little or no reason to borrow, since they are not seeing enough sales to justify expanding. Besides, a number of firms have socked away big chunks of cash which they will probably draw down first, since in today's low-interest-rate environment, these liquid funds are earning next to nothing. What the Fed should have done was to stop paying the banks for keeping excess funds with the central bank and begin charging them instead. Another way to encourage the banks to lend would be to relax the Fed's new-found scrutiny over bank loans and capital. At any rate, monetary policy alone is not able to create jobs--much less boost the economy at large. Easy money is a necessary but not a sufficient condition when you want to bolster economic activity. To ensure a growing economy requires fiscal policy to work in tandem with easy money. In other words, the government should spend more and tax less to boost aggregate purchasing power. The problem is that fiscal policy is heading in the wrong direction. Instead of loosening, it is tightening; instead of being supportive, it is being restrictive. Some tax cuts are set to expire next year while the president wants to raise taxes on the "wealthy." Meanwhile, Washington has already cut spending, forcing many states and local governments, as well as their contractors, to cut staff and thus exacerbate today's high anxiety over jobs.