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Posted by: Doug Henwood | July 13, 2011

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.

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Responses

  1. I know Doug you can’t respond to all conceptual outrages descending upon us from the pop media – there’s not enough time in the day for that! But the current “theme” from NPR, The New Normal, strikes me as supremely outrageous for a so-called public media outlet. Maybe a program focusing on the significance of growth as the only means to define a healthy economy. I favor the ideas of the de-growth movement in Europe, though I don’t think that term will ever escape the confines of the academic playground.

    FromNPR’s All Things Considered (sic)

    What The ‘New Normal’ Means For Americans

    July 12, 2011
    The sluggish U.S. economy disappointed most forecasters, not to mention job seekers, in the first half of this year.
    It grew at an annual rate of just under 2 percent, which is below the average for the last half-century when the U.S. economy grew about 3 percent each year.
    And although it may not seem like much, that 1 percentage point makes a big difference — influential analysts are saying we’re in for a “new normal.”
    The “new normal” is a term coined by the brain trust at the giant bond fund PIMCO. Anthony Crescenzi, a PIMCO vice president, strategist and portfolio manager, is part of that brain trust.

    …and continuing with this theme they present today, Wed. 13th July with this:

    http://www.npr.org/2011/07/12/137708256/what-the-new-normal-means-for-americans

    From Morning Edition

    Emphasis On Innovation Could Boost U.S. Economy

    July 13, 2011
    In a sluggish economy with slow growth and high unemployment, innovation may be part of the solution.
    Tom Clement is just the sort of entrepreneur the U.S. needs to propel the economy.

    … how this deals with the issues of employment are beyond me. “Innovation” usually implies the introduction of machinery to replace workers, except in the food industries.

  2. […] whiz kid journalist of the left, pointed out to me in a Facebook exchange (reproduced here and here), the multiplier effects of a jobs program are far higher than, say, tax cuts (not something, it […]

  3. […] Jobs follow-up: limits of monetary policy from LBO News from Doug Henwood by Doug Henwood   […]

  4. Doug – When you do your extended piece about Bernanke and the demise of elite economic thinking, you might also underscore how this period is different from Weimar (1920-1922) and Jimmy Carter (1977-1980). I’m sure Rove has already distributed his talking points on the Carter=Obama equivalence theorem.

  5. […] of increasing inflation targets. Based on my discussions with Doug Henwood, who’s really done the heavy lifting here and should be brought more forcefully into this discussion, we don’t seem to be in that […]


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