In Comments, Fed Officials Signal New Economic Push (printing another $500 billion)

New York Times ^ | October 1, 2010 | SEWELL CHAN

[reaganaut1]

Momentum within the Federal Reserve this week continued to build toward resuming purchases of huge amounts of government debt to help the flagging economic recovery.

The president of the Federal Reserve Bank of New York, the most powerful of the 12 Fed regional presidents, made a significant argument for the strategy Friday, joining similar expressions of cautious support this week by his counterparts in Boston and Chicago. Their statements helped solidify a belief on Wall Street that the central bank was likely to resume large-scale purchases of Treasury securities after the Nov. 2 elections.

...

Gridlock over fiscal policy in Washington has most likely added pressure on the Fed to use monetary policy to support the economy, though Fed officials have not publicly said that. What the officials are saying, in increasing unison, is that inflation is undesirably low, well below the implicit target of about 2 percent, and that unemployment, at 9.6 percent, is far too high.

“Viewed through the lens of the Federal Reserve’s dual mandate — the pursuit of the highest level of employment consistent with price stability — the current situation is wholly unsatisfactory,” the New York Fed president, William C. Dudley, said in a speech in Midtown Manhattan. He suggested that the Fed should act unless economic conditions noticeably improve soon.

His perspective is believed to be in line with that of Janet L. Yellen, who was confirmed Wednesday as the Fed’s vice chairwoman.

...

Instead, Mr. Dudley spoke favorably about quantitative easing, citing calculations suggesting that “$500 billion worth of purchases would provide about as much stimulus as a reduction in the federal funds rate of between half a point and three-quarters of a point.

[reaganaut1]

The Fed is supposed to preserve sound money, not solve all our economic problems, but our all-knowing Fed officials don't understand that. Dudley, the Fed official quoted, was formerly at Goldman Sachs. Shocking.

The Federal Reserve has already pushed short-term interest rates to zero, and it cannot fix the problem of 9.6% unemployment. To do that, Republicans need to repeal Obamacare and its health care mandates, force Obama to lift the drilling moratorium, keep income taxes from rising, move the length of unemployment benefits back to 6 months from 2 years, and take other steps to encourage businesses to hire and people to work.

[listenhillary]

Even a modest plan to reduce government spending one percent a year would be a move in the right direction. I doubt they can achieve that.

[Steamburg]

I thought these guys were supposed to have a background in economics. They must have gone to the Trotsky school.

Reduction in government spending, means a reduction in government spending unless you work for the government.

[bkepley]

Since I’m not an economist I don’t understand why any devaluation of a currency is desirable.

[Bean Counter]

yah...The phrase “after the November 2nd elections” makes me more nauseous the phrase “unexpected” does. I’m worried sick about how many bills are really coming due after the elections. The Congressional leadership has been deliberately lying and hiding so much from us already, I wonder what we are really facing when Peloski’s Politburo finally shuts down for good.

We have some very good indications about many things facing us, and the Media is still stirring the pot about this “lame duck” session of Congress “after the November 2nd elections”. I think it’s pure hype, and I look for the Dhimmies to do as much damage to the American voters as they can in order to try and make as much of their Socialist agenda permanent as possible before they are run out of town. The Labour Party did exactly that in Britain, and the British taxpayers will be paying for it for decades. We’ll be lucky if we ever pay some of our debt off.