July 18, 2012
Fed Action. Helping or Hurting?
Charged with the duty of encouraging employment, the Federal Reserve has implemented aggressive monetary measures. Expanding the Fed's balance sheet by nearly 3 trillion dollars via the purchases of an array of debt instruments, Bernanke and company have used traditional monetary tools, and some not so traditional measures, to meet the challenges of its employment mandate. The impact has been paltry and disappointing. For, as Newton stated, for every action, there is an equal and opposite re-action. This holds true in the current interest rate environment as set by the Federal Reserve. Some of these old monetary measures now utilized by the Fed could indeed have had a greater impact if we still had a large manufacturing base. But we have lost much of that manufacturing to China and elsewhere. We are left with a "service-based" economy. So what impact do these Federal Reserve actions have on a "service-based" economy? And what effect on...(Read Full Article)