THE ECONOMY AND THE FED -- OUT OF IDEAS, AMMUNITION
This link is The WSJ's front page lead today. Chairman Bernanke and The Fed are out of ideas and out of ammunition. They are scrambling and will be tackled behind the line of scrimmage - again. If they understand the current economy, and they surely should, there is little evidence of it. Their adherence to Keynesian theory has failed miserably. Even if we stretch reality and give Keynesian theory a bit of credit, although little success has been had in the world, the Fed's and the Administration misapplied the theory. Stimulus funds were misspent from the git-go. Of course, if you listen only to Keynesian high priests such as Paul Krugman or Alan Blinder you will never hear this truth. In fact, TRUTH can legitimately be said to be rare today in any discourse about America's national condition. She is critically ill as I've said in other writes. It is true.
We are very likely to hear the president speak tonight about spending on infrastructure jobs now being the solution. He's also likely to invoke FDR's programs as examples of success with federal spending on jobs. There is truth to that, as I've recently agreed to in support of an editorial by a friend. FDR's CCC and WPA created some lasting benefits. But, there is a BIGGER TRUTH. Absent mobilization for WWII, the war itself and the after-war growth, how would FDR have dealt with the federal make-work employment situation? WWII created the economic success, like it or not.
If Obama promotes a stimulus plan that involves federally funded jobs for "infrastructure" development (the new mantra), what will be the end game to convert federal spending into private enterprise? He will be waiting and hoping, as with the last stimulus program, for an economic recovery that didn't happen over the past 3 years and won't in the next few......not with the structural problems we have. Furthermore, Europe and the Euro are about to crash and we will be a part of that debacle.
As asserted in previous articles, politicians will not solve our problems nor will The Fed, which now is political as well. With the leadership void we have and with a dearth of understanding of the fundamental problems, America's national condition will remain critical. The prognosis for her recovery is not good. Surely not soon, and not until we have the right leadership and some intellectual character absent today.
Sorry to be pessimistic, but in this case pessimism and realism are equated.