As you may have read, some former Fed Officials are suggesting a new round of securities purchases to spur the economy. They claim that this move is in response to stifled job growth and continued recession issues.
Well, I used a harsher word before, but this time I’m going with shenanigans.
Purchase a new round of securities? Are you kidding me? Are they really shortsighted enough to think that this move will get the economy moving. This is part of the Fed’s old bag of tricks, but as we’ve seen before buying back bonds from the free market does not successfully stimulate the economy.
Speaking of old bags of tricks, lets look at another one that’s equivalent to peeing in the ocean, which is to say that it adds liquid but doesn’t change the levels: stimulus money.
The Fed buys securities and the government provides stimulus money, right? The last round of stimulus money was effectively invested at 1/10th of 1% or used simply to pay down debt. In case I’m being obtuse in my exaggerated implications, I’m saying that people didn’t spend the money, and when they don’t spend money there is no economic spurring. Stimulus money is as effective as buying back securities . . . tinkling in the ocean, remember?
These are just old tricks that don’t work.
Everybody wants to see the economy jogged back into high gear (or gear?), but as the fed said yesterday, it would hold rates for two years. This acknowledges that we’re going to be in a funk of an economy for at least two years.
Rather than spending money buying back securities – old tricks – we need to cut spending in dramatic ways. For instance, end entitlement programs. Did you know that anyone who serves in Congress for any length of time gets health premium insurance forever? I ask again: Are you kidding me? We’re paying for this! This might also be peeing in the ocean but if we all relieve ourselves at once maybe the levels will change.
If the Fed wants to “spur” the economy, then we all need to be patient, tighten our belts, stop government spending, get out of debt and then be led by a solvent, healthy government that can make wise decisions for its people.