Volcker: Fed Plan an Illusion, Won't Boost Economy

Money News ^ | 11/05/10

[TigerLikesRooster]

Volcker: Fed Plan an Illusion, Won't Boost Economy

Friday, November 5, 2010 10:37 AM

Former Federal Reserve Chairman Paul Volcker says the U.S. central bank's plan to buy hundreds of billions of dollars in government bonds probably won't do much to boost the economic recovery.

The Fed announced Wednesday that it would purchase $600 billion in Treasurys, aiming to lower long-term interest rates in an effort to spur spending and ultimately lower the U.S. unemployment rate, currently at 9.6 percent. The move comes on the heels of previous purchases of $1.7 trillion in mortgage and Treasury bonds.

Volcker told a business audience in Seoul that the Fed's bond plan is obviously an attempt to spur the U.S. economy but "is not the kind of action that's likely to change the general picture that I've described as slow and labored recovery over a period of time."

[Huck]

I recall reading that Volcker credits Reagan for being totally supportive of the move, despite the political difficulty. IIRC, that's where Reagan's "stay the course" manta came from. He was telling people to give his economic program time to work. It did work, just in time for a re-election of FDR-like proportions.

My assessment of this situation has from the start been that it would be a long slog through the muck. That day would follow day, month to month, year to year, and nothing much would change. You'd look up one day and four years will have gone by, all like the others. The opposite of robust.

But that keeps telling me DEFLATION. I'm just a schmoe, but it looks that way to me. In a deflationary depression, no amount of pump-priming will save you. You can't get inflation no matter how hard you try. All you do is dig the deflationary hole deeper and tack some more years onto the slog.

[phockthis]

We don’t expect miracles but we do demand competance..

[B4Ranch]

>>Bad news for elected officials—if Volcker is right, then lots of incumbents are going to be voted out of office in the next election cycle.<<

I pray that this happens. We need a cleaning from the bottom floor to top floor ceiling. I think we may find that we don’t need all the floors that we currently use.

[PGalt]

Volker is a true figure head. He is there only to be brought out of storage and paraded in front of the cameras whenever...

Exactly. Like his brilliant investigation in the oil-for-food-scandal. /sarcasm

Con-men enabling con-men.

A little late to the (tea) party, Paul.

Great thread. Thanks to all posters.

[ex-Texan]

Bank of America Edges Closer to Tipping Point: Jonathan Weil

[RipSawyer]

OK, I ain’t real smart like, see, but as fer as I kin gether
this hole plan is ‘bout the same like as iffen I was tuh go out to tha storage trailer an’ crank up some o’ that ol’ worthess offset printin’ equipment I got still settin’ aroun’ an’ print up 600 billion dollars worf o’ counterfit moolah. Is that there ‘bout rite?

[GOPJ]

Thanks for the ping.

[RipSawyer]

“Americans don’t believe in slow and labored recoveries. They want miracles.”
///////////////////////////////////////////////////////////

They have a right to expect miracles, Obama promised miracles! On the stage at Denver he said that he would defeat POVERTY, DISEASE AND CLIMATE CHANGE! That is the kind of thing that if you can’t do it quickly then you just can’t do it at all. If you claim the powers of a god then it is rather pathetic to say that you need more time to work your miracles.

[GOPJ]

"The influence of this kind of action on longer term interest rates, in particular, is ambiguous because the immediate impact of buying bonds ought to be to drive bond prices up and interest rates down," he said. "But if people get concerned about longer run inflationary impacts, the effects go in the other direction."

Ahhh, 'the rub'...

[RipSawyer]

I wish we could have some deflation in food and energy.

[Pelham]

We haven’t had a competent Fed chairman since Volcker. Too bad he’s nearly 90, we need him to run it again.

[Pelham]

Palmer for Fed chairman.

[Huck]

I wish we could have some deflation in food and energy.

My understanding is that what we have in those sectors is part of a larger commodity bubble.

[RipSawyer]

Let’s hope that bubble bursts soon if that is the case. I have begun to suspect there may be some real scarcity developing.