Jobs follow-up: limits of monetary policy
A follow-up to the previous, inspired by another question from Corey:
I should have said in there that the reason that quantitative easing hasn’t worked well is that monetary policy is ineffective when an economy is this sick. It’s the classic “pushing on a string” situation. Corps have lots of cash – they’re just not investing or hiring. The financial markets are flush. You need fiscal policy to mobilize all that festering cash. Inflation is now about 4% – all because of commodities, because “core” inflation (ex food and energy) is only around 2%. It’s also clear the Fed isn’t going to go crazy and tighten out of a fear of inflation anytime soon, thank God. Some yahoos would love that, but Bernanke’s too smart and historically informed to do it. I think I’ll do a blog post a little later about Bernanke and the rot among our ruling class that will approach this from a different angle.