Posted by Michael A. Kamperman on February 4, 2010
Today the Bank of England announced they are ending their quantitative easing program for the time being. They will no longer print money and buy their own government bonds. The Federal Reserve has already announced they will stop printing money and purchasing mortgages. The Japanese Central Bank remains lost in translation. The ECB remains clueless. This week the Australian Central Bank back-pedaled and backed off raising interest rates, which shocked the markets since all 20 analysts predicted they would continue raising interest rates. The Australians came to their senses and stopped the madness. It is only a matter of time before the Federal Reserve, the Bank of England, the Japanese Central Bank, and yes even the European Central Bank begin to aggressively print money to stop the debt-induced deflationary depression in its tracks. How long it takes and how much more global unemployment pain will be endured before they come to their senses is anybody’s guess. There is no doubt this will happen, for there is no other way out. The unemployment crisis, which will be highlighted by the U.S. unemployment report tomorrow, is a global crisis. Unemployment rates in Spain are officially 19%, which are Great Depression levels. Yet the ECB and the bond vigilantes are demanding that Spain join Greece and initiate significant cutbacks in government spending including firing more government workers and cutting wages. Even Herbert Hoover increased federal government spending in the 1930’s, though not by much. Cutting government spending will lead to a decline in aggregate demand which will further depress the global economy leading to more firings of private sector workers. The time for euphemisms like “layoffs” is over. Workers are being told to hit the streets. The global economy is suffering from a lack of demand due to ridiculously tight credit conditions for consumers and small businesses. Tight credit conditions have once again spread to corporate borrowers and now they are being inflicted on sovereign nations. The world is still in the midst of global deleveraging because there is simply not enough money in the world to support all of the debts.
The nations in the euro will either share their debts or they will be forced to break the euro up and return to their own currencies. My advice to the Europeans is to have all 15 nations in the euro guarantee the debts of all other 15 nations, true monetary integration. While this was not part of their original treaty it either gets added now or they can kiss the euro goodbye. Then, the ECB should embark on an aggressive quantitative easing program to make sure the debts do not require cutbacks in government services and do not fall on the backs of the taxpayers. The only risk would be the euro might depreciate against other currencies. If this happened it would only make European exports much more competitive improving their balance of trade.
What is needed now is global leadership, sadly it is lacking. A money printing solution to the economic crisis exists and yet politicians are cowered by false prophets preaching the limits of money creation and the anachronistic worship of gold. Those concerned about high unemployment rates need to understand those rates will trend higher and higher unless and until the world central banks come to their senses and re-inflate the money supply. Helicopter Ben needs to rev up the engines or forever sacrifice his reputation as having avoided another Great Depression. In order to solve a crisis you have to understand it first.
Posted by Michael A. Kamperman on February 1, 2010
President Obama’s 2010 budget is not only a jobs killer, it is heartless. The military has a motto that no man should be left behind. If a comrade in arms falls, then you do everything possible to save them. Apparently this motto does not extend to the unemployed. If they fall they are on their own, just as if they were in the streets of Pamplona running with the bulls. The President’s new budget cuts unemployment benefits by $75 billion, which is almost a 50% reduction. Yet the Whitehouse estimates the unemployment rate will only fall to 9.8% by the end of 2010. The only explanation is the President is willing to let unemployment benefits run out for those who are unable to find work. This despite the fact that there is still only one job opening in America for every six applicants. Furthermore, the budget cuts over $10 billion from federal construction projects ranging from the military to schools. Construction spending in the U.S. was reported to fall by 1.2% for the second month in a row. Construction projects equals jobs. Cutting construction projects is equivalent to cutting construction jobs. Furthermore, unbelievably the budget cuts Medicaid expenditures by more than 10%, or $33 billion. Surely the President is not in favor of cutting health care to the poor. The only explanation is the President is willing to let the states pick up more of the tab for Medicaid. Never mind of course that the states are broke and they cannot print money like the federal government.
The federal budget deficit faces a paradox. There is no way to cut the deficit unless spending is cut. Alternatively, there is no way to significantly raise tax revenues unless unemployment rates are significantly lowered and people are put back to work. So there are two paths to lowering the deficit; by cutting spending or by putting people back to work. Growing the econ0my will benefit both the employed and the unemployed. Cutting federal spending will not benefit the unemployed and it will not benefit anyone else. It will ultimately raise the taxes of those still working while austerity measures are put into place.
Unemployment is the number one issue in America, not deficit reduction. People want and need jobs. The President will not succeed by rhetorically expressing a concern for the unemployed while deploying policies that do not create jobs. Yes, the President’s budget includes $100 billion worth of job creation measures. But consider that we have lost several million jobs since the $787 billion stimulus bill was enacted. If we lost several million jobs spending several hundred billion dollars, then is it plausible we will create millions of jobs if we simply spend $100 billion more? What we need is a one trillion dollar jobs bill that includes construction spending and aid to the states. Instead, we get not only a cut back in unemployment benefits but a cutback in federal construction spending and a cutback in Medicaid spending, which means a cutback to the states. Both FDR and Reagan focused on economic growth. They arguably had the most successful Presidencies of the 20th Century. Herbert Hoover focused on the limitations of the federal government during an economic crisis and he arguably had the least successful Presidency of the 20th century. It’s not that Hoover didn’t try. He didn’t try hard enough. History will only judge President Obama by the outcomes of his Presidency, not his intentions. Like Hoover he will be remembered by whether or not he created jobs, not by whether or not he cut the deficit.
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Posted by Michael A. Kamperman on January 27, 2010
President Obama has decided he needs to distance himself from the Too-Big-to-Fail taxpayer bailed-out Zombie banks. Politically speaking, who can blame him? But there is a difference between campaign rhetoric and policy. The President’s is embracing former Fed Chair Paul Volcker’s quest to separate out taxpayer backed deposits from riskier strategies such as proprietary trading, private equity investments, and hedge funds. It would be nice to go back to the Glass-Steagall era, but that ship has sailed. The age of financial innocence is over and it is not coming back in our lifetime. After the disorderly Lehman Brothers bankruptcy no Treasury Secretary or Federal Reserve Chairman will allow a large financial institution to go under in a non-planned, chaotic, your on your own buddy way. Too-Big-to-Fail means that if an institution goes under it is large enough to drag multiple other institutions under with it setting off a domino effect. What the President should propose are regulations that allow the Treasury and the Federal Reserve to close financial institutions in the same way they can close FDIC insured commercial banks. The federal government needs to be able to seize all assets of an insolvent financial institution, wipe out the shareholders, and sell the assets to another institution who will guarantee the firms accounts and counter-parties.
What is disconcerting is that by embracing the Volcker position the President is indicating he doesn’t understand the root cause of the financial crisis, and therefore he doesn’t understand what needs to be done to fix it. Proprietary trading is risky, private equity is risky, and hedge fund trading strategies are risky. But none of these activities caused the credit crisis, and none of these activities create systemic risk. Systemic risk comes from a system that is too highly leveraged so that when an unforeseen crisis arises the financial institutions don’t have enough capital to ride out the storm. The cause of the current credit crisis has already been fixed. The markets fixed it. The cause of the crisis resulted from lenders being able to make loans and then sell the loans for a large profit with no ongoing risk if a loan wasn’t repaid. But the AAA rated asset-backed securities market imploded and now if you make a loan you bear the risk of that loan. Hence, the pendulum has swung from loans being too easy to get to being too hard to get.
The President needs to focus on restoring normal credit conditions to small businesses and consumers. The President should leave the structure of banks alone and simply insist they carry more capital compared to their assets and he should insist they start to lend again. Creating uncertainty is no way to encourage banks to take on the risks of new loans. Lending is more likely to happen if an institution is well diversified and can rely on profits from non-lending activities to cushion potential losses from lending activities. I can’t believe that President Obama has backed me into a corner where I have to defend the Zombie banks. What we need is lending, lending, lending rather than extending and pretending. We will not create jobs until small businesses and consumers can access capital. The President should come out in favor of creating a “bad bank” to absorb the toxic assets on the books of the banks. This is the only way to return the Zombies to the land of the living.
Posted by Michael A. Kamperman on January 16, 2010
The Wall Street Journal is reporting the Federal Reserve plans to let most of their emergency measures expire as scheduled during the next two months. The Federal Reserve will remove guarantees for money market funds on February 1. They will also no longer make emergency loans to businesses that are having trouble accessing the commercial paper market. Most significantly, they will stop purchasing federal agency paper and mortgages at the end of March as scheduled. They will leave interest rates near zero until the economy demonstrates it has improved, and that the improvement is sustainable. Basically, the Fed plans to hide and watch for the remainder of 2010. Surprisingly, the Fed acknowledges that unemployment will probably remain stubbornly high for the foreseeable future. Yet there is a belief by the majority of Fed Governors that they have done enough and there is not much more they can do for the economy.
Balderdash! The Federal Reserve is charged with both price stability and full employment. By tacitly acknowledging we have an employment problem, but not using more of the tools at their disposal, the Fed is throwing in the Keynesian towel and adopting the creative destruction concepts of the Austrian School of Economics. If Ben Bernanke cannot move the Federal Reserve Board to fulfill its mandate, then he should not be confirmed to a second term. In a war, if you’re not winning, you fire the generals and bring in leaders who are willing to be more aggressive. Just because the Fed has done more than they ever have before doesn’t mean they have done enough, nor all that they can. Haiti is an example of an overwhelming crisis that requires a much bigger effort than what has been put forward so far. It doesn’t matter that what we are sending is more than we have ever sent to an island nation. It only matters that we do the job required of us to save those people, especially since we have the resources to do it sitting on U.S. bases. Like Haiti, the scale of our economic collapse is beyond the experience and the ability of our current economic rescue team to handle.
The Federal Reserve is now looking to the Whitehouse and the Congress to solve the economic Rubik’s Cube of finding a way out of the economic mess we find ourselves in. Unfortunately, massive quantitative easing is a big part of the way out and the Fed controls that. Doubly unfortunate is the fact that the Whitehouse and the Congress appear to be like deer in the economic headlights. Whatever came of the President’s job summit? Should Brown win in Massachusetts on Tuesday, then we could have gridlock right up until the mid-term elections in November. Even if the Democrat Coakley pulls it out, a near miss will call for recalibration. The situation in Haiti has clarified for me the problem with finding a solution. CNN reported that U.N. doctors left 25 patients in a field hospital unattended at night because of security fears. Yet CNN’s correspondent Dr. Sanjay Gupta, a hero, was able and willing to stay with the patients through the night to give them the best chance at survival. Because of his heroics all of the patients lived through the night. The command and control structure for the Haitian rescue mission is disjointed and broken. No one is really in charge and chaos reigns. The same problem has happened with the federal government’s response to the economic crisis. No one is in charge and no one is willing to be a hero. Everyone wants to stay with protocol and not stray to far from the orthodoxy. Therefore, they can always claim they did all they could and it wasn’t their fault. We need to throw caution to the wind and place a U.S. General in charge of the entire Haitian rescue operation, protocol be damned, and give that person full authority with unlimited resources to get the job done. Likewise, we need the President to use his existing authority to take ownership for providing a solution to the economic crisis. Instead, all we have now is bickering and debate and minimal efforts that are too meager to be effective.
Posted by Michael A. Kamperman on January 10, 2010
Sometimes it is better to sit back and think rather than to react. My initial reaction was to pound the table on how the latest unemployment report is showing the job situation to be much weaker than the economists and the Obama Administration have led us to believe. The talk of an improving trend in job losses has become so acceptable that the Administration is out taking credit for losing only 85,000 jobs in December and stating that it is a 90% improvement over peak monthly job losses. My reflex is to point out that in order to keep a 10% unemployment rate we had to drop another 600,000 plus people out of the labor force. Despite the stimulus bill aimed at supporting state budgets we lost another 21,000 government jobs. I also wanted to point out that when we hire 1.2 million census workers between now and May, only to let them go by November, we will be temporarily understating the true state of the unemployment situation. The reality is this unemployment report showed no signs that job creation is on the horizon, unless of course you are looking for temporary work without benefits. Will the new census workers receive health insurance, or a pension, or a sense of permanency? But giving a blow by blow description of what is happening in the economic game can cause one to fail to see the forest for the trees. It is the methods we are using to keep the economic game stats that are deluding us into thinking we are better off than we really are. We need an economist of stature to step forward and say we need to rewrite the way we measure the outcome of the game.
Since the beginning of 2008 we have dropped 1 million people out of the labor force. We started 2008 by saying 154 million Americans wanted a full-time job and we ended 2009 by saying only 153 million people wanted a full-time job. We need to add 125,000 workers per month to account for a 1% growth in population. This means we have 3 million more people looking for a full-time job at the end of 2009 than at the beginning of 2008. Effectively we have cut 4 million people out of the labor force because they have become too discouraged to get turned down for the hundredth time. If we add these workers back in then the number of people unemployed would be nearing 20 million and the unemployment rate would be 12.3%. While it may have made sense to assume that if someone wasn’t aggressively looking for work in a vibrant economy that person didn’t want a job bad enough to be counted as officially unemployed, it makes no sense to use the same criteria in a depressed economy when jobs simply are not available and the number of long-term unemployed breaks a new record month after month after month. When they counted the unemployed during the Great Depression they didn’t ask whether or not you had mailed out three resumes in the last three weeks.
Undercounting our unemployed leads us to policy errors. The Obama Administration would be not be so complacent to claim the GDP measured recession is over and we are showing a positive trend in job losses if the nightly news reported the official unemployment rate is now up to 12.3%, a level not seen since the Great Depression. We are hiding our soup lines with food stamps. Over 6 million people say the only income they have is food stamps. They couldn’t eat without them. When the news media and the economic pundits keep pushing the lie that we have avoided another Great Depression they are only prolonging the solutions and open the door to who knows what when it all hits the fan. Sweeping the truth under the rug is only going to lead to more pain and even larger outrage. Are we sure we can control the fury?
Posted by Michael A. Kamperman on December 31, 2009
1. The banks are hiding losses and are feverishly downsizing to maintain their capital ratios. Extremely tight lending standards will continue to crimp the ability of consumers and small businesses to borrow and spend in 2010.
2. The Obama Administration is focused on reducing the federal budget deficit. They believe the forecasts calling for an economic recovery next year. Hence, there will not be a new major stimulus program passed in the first half of 2010.
3. Residential real estate prices will continue to decline next year. The plunge in November new home sales showed what will happen to the housing market when the benefits of the tax credit are removed. The extension of the tax credit is set to expire at the end of April, just when the selling season begins in earnest.
4. State and local budgets will continue to be squeezed by declining tax revenue. The federal government will not bridge the deficits even with the stimulus money focused primarily on providing aid to states, municipalities, and school districts. New York has joined California in the ranks of states with a serious budget crisis.
5. Many of the unemployed are running out of money. Millions of people who have been hanging on by a thread will slip into extreme poverty in 2010. The continued spending from savings and extended unemployment benefits will cease.
6. Deflation has gained a global foothold in almost all of the industrialized economies. Should a V-Shaped recovery fail to materialize there could well be a significant sell off in most economically sensitive commodities significantly exacerbating deflationary pressures.
7. Concerns over Sovereign debt kicked off by Dubai and quickly spilling into Greece will spread. This will force national governments that have been propping up spending and bailing out banks to retrench.
8. Beggar thy neighbor strategies are rapidly spreading as protectionism naturally gains sway. The U.S. has already entered into a tariff tiff with China; first over tires and now over steel.
9. Political uncertainty in the U.S. surrounding the impact of the health insurance bill, the potential impact of global warming legislation or regulation, and the possibility of a change in the balance of power in Congress after the mid-term elections will leave business leaders cautious during the duration of 2010.
10. Confidence remains low despite all of the Kings Horses and all of the Kings Women trying to put it back together again. Should several of the above trends worsen confidence could collapse completely in 2010….what then?
Posted by Michael A. Kamperman on December 29, 2009
The objective of this blog is to advocate for the unemployed and find a macro-solution to returning those willing and able to work to decent jobs. I am strategically using a three-pronged approach which includes analyzing the most recent economic reports to gain insights into the outlook for unemployment, putting forth creative solutions that can improve economic growth, and holding Congress and the current Presidential Administration’s feet to the fire to prod them to do all they can to improve the potential for the unemployed to find meaningful full-time work. Most of the time it seems my message falls on deaf ears. Yet I know there are many out there like me who feel passionately about finding a way to restore the American dream to so many families who are suffering. I think we all know someone who is unemployed through no fault of their own. Most of us couldn’t say that two years ago. Yesterday I found a visual image of the pain many of these people feel when I saw the movie Up in the Air. In the movie George Clooney works for a firm that professionally fires people for large employers. It shows person after person being confronted with the horror of losing their job. These individuals feel dismayed, betrayed, and frightened for their family’s economic future. Since I am not a brilliant writer of prose I will simply highly recommend you see this movie to heighten your insight into the number one tragedy facing Americans: unemployment.
In the movie George Clooney’s character spends a lot of time flying. Unfortunately, the 2010 outlook for the unemployed is that they will remain grounded. There is no wind coming from Washington to lift their wings. Economic growth remains anemic and yet Congress and Administration are more concerned about the federal budget deficit than they are with providing enough stimuli to the economy to return the unemployed to work. And the Federal Reserve actually seems intent on ending quantitative easing in the near term. They all appear to believe the economy will magically return to growth on its own despite extremely tight credit conditions and an over built housing market. Sadly, they also appear content with the status quo and the concept that some pain now is necessary to provide creative destruction. Herbert Hoover and his advisers felt the same way and believed the same things.
President Obama has the power to make a real difference in the lives of the unemployed. He can lead our nation out of this economic morass and return the legions of the unemployed to dignified jobs. But he has to feel passionate about the issue. It can not be just another thing on his to do list. He needs to feel the weight of the unemployed on his shoulders. He needs to feel their pain. If he took on the greatest challenge of his Presidency with passion he would see success transcends political partisanship, personal friendship, and his pre-conceived notions about what his Presidency would be about. It is about jobs whether or not he is willing to rise to the challenge. If he is serious he will quit playing the blame game, he will fire Summers and Geithner, and he will jettison his notions about what America cannot do. Rather than preaching to us about the limits of government he will extol the wonders of the American spirit. He will ask employers to hire people. He will ask employers how the federal government can ease their burden to put people back to work. He will ask for Wall Street to fund real innovation rather than financial gimmickry. It starts with finding a new Presidential adviser unlike Larry Summers who believes the greatest economic innovations in America include the electric light bulb, the telephone, and the computer and not generally accepted accounting principles.
Posted by Michael A. Kamperman on December 9, 2009
President Obama has decided to use the $200 billion in unspent TARP funds to fund his jobs initiative and to reduce the deficit. The TARP fund is growing as the Treasury has allowed Bank of America, and will soon allow Citigroup and Wells Fargo, to repay the TARP funds they received. The President wants to focus on capital gains tax cuts, jobs tax credits, home insulation tax credits, increased SBA funding for small businesses, and some further aid to the states for shovel ready infrastructure projects as his main thrust on improving the unemployment picture. The Administration continues to argue the stimulus plan has been successful and has generated 1.6 million jobs, which is true as long as one closes their eyes and ignores the 7 million jobs lost and the failure to create the additional 3 million needed jobs to keep up with population growth. Another major stimulus plan is not in the cards. The President’s jobs plan is focused on politics and not on economics. The President wants to argue the stimulus plan was a success, that he is concerned for the unemployed and willing to provide some additional aid, and that the deficit will be reduced by returning some unspent TARP funds. The problem is the Treasury is allowing the banks to repay TARP by delevering their balance sheets by shrinking their loan portfolios. Hence hundreds of billions of dollars are not being lent to small businesses and consumers so these banks can repay their TARP funds. This is just one more example of coddling Wall Street at the expense of Main Street. It would be much better for the economy to force the banks to keep the TARP funds and lend them rather than to have them returned and to put forth wasteful job creation ideas like an employers tax credit and a cut in the capital gains tax. The vast majority of these tax benefits will go to successful companies that were going to hire people anyway.
Meanwhile, the Administration needs to understand the federal government’s economic actions are not occurring in a vacuum. The states are projected to run budget shortfalls of over $350 billion in 2010 and 2011. The size of the additional inefficient federal spending for jobs is only a fraction of the size of the cuts coming from state and city governments. The loss of bank credit for small businesses combined with job cuts from state and local governments dwarf the size of the additional help President Obama is offering with his minimalist new initiatives.
It is past time for President Obama to fire Summers, Geithner, and the rest of his economic team and to bring in people who understand we are still in the midst of a global economic meltdown. We need the federal government to spend a lot more money and we need the Federal Reserve to print a lot more money or we will see a massive double dip in the global economy similar to the second big dip in late 1931 that eventually drove the unemployment rate to 25% in 1933. The collapse of Dubai is not happening in a vacuum. All of a sudden Greece has been downgraded and Spain has been put on notice by the rating agencies. The credit markets are tightening up again as reality sets in and the bear market bounce ends. We need reality to reach the Whitehouse so they recognize their shrewd TARP moves are taking away more than they are giving.
Posted by Michael A. Kamperman on November 20, 2009
Yesterday I took some time off from my day job and attended the Texas at the Table Hunger Summit. The room was filled with good hearted people interested in helping their fellow citizens who are less fortunate than they are. Speakers included deputy commissioners of the USDA and the Texas Agricultural Commissioner. There lofty goal is to virtually end hunger in America by 2015. The latest update from the USDA is that 36 million people are participating in the Supplemental Nutrition Assistance Program, which we all know as food stamps. Up to 49 million people reported trouble buying food at some point in the last year. Shockingly, one in two infants born in Texas qualifies for the WIC program. Unfortunately, the debt-induced deflationary depression the country and the world have fallen into means there will probably be more hunger issues in the near term, not less. What’s worse is the resources to help the hungry are shrinking just when the needs are increasing.
The Texas Agricultural Commissioner said tax revenues keep falling and he anticipates state agencies will be asked to reduce spending below budgeted levels after the first of the year to compensate for an unanticipated multi-billion dollar gap. All of the other large states and most local governments are facing the same pressures. In Waco, our local food bank Caritas has 200 new families it has never seen before looking for assistance at a time when charitable donations are down. Since between now and January an additional one million people are expected to run out of all unemployment benefits it is a safe bet the number of Americans facing potential hunger is going to keep growing.
When President Obama talks about reducing the deficit he is talking about cutting funding for hunger programs at a time when all other funding sources are shrinking and the needs are growing. And, he is talking about cutting the number of people directly employed by the federal government at the same time the states and local governments are making job cuts. Effectively, when the President talks about deficit reduction in the middle of a deflationary depression he is talking about increasing the hunger pains of the American people. President Obama needs to reverse course and say deficit reduction will not be a priority of his administration unless and until the unemployment rate falls back below 7.6%, which is the rate he inherited. He should stake his Presidency on creating jobs and let the deficit be damned. The President should put forward a budget that not only meets the growing needs of the hungry and the unemployed, but also a budget that provides more aid to the states so they can close their funding gaps without further budget cuts. Most of the people concerned about the deficit are really concerned their taxes are about to go way up. The President can alleviate these fears by calling on the Fed to fulfill their mandate for full employment and to up their program of quantitative easing to a level that not only fully covers the budget deficit, but also actually reduces the national debt. He should demand they not end quantitative easing until the unemployment rate falls back below a rate of 7.6%. Mr. President, it is time for you to morph from Herbert Hoover to FDR.
Posted by Michael A. Kamperman on October 28, 2009
Next week the Federal Open Market Committee will meet to determine whether to or not to change their near zero interest rate policy and whether or not to signal an exit strategy from quantitative easing to those concerned about runaway inflation and the fall of the dollar. Absolutely without a doubt the Fed needs to ignore the voices calling for a clear exit strategy and needs to up their program of quantitative easing to purchase more U.S. Treasury bonds. The real economy remains in terrible shape and deflation is gaining traction in the U.S. and global economy. Without a boost from the first time home buyers tax credit new home sales started falling again in September, because there was no longer enough time to complete a new home and close by the November 30 deadline. Consumer confidence numbers are falling hard again, which will further dampen consumer spending. This is also a clear signal the job market has a giant need not apply sign attached to it. The Fed cannot meet its mandate of full employment without being much more aggressive by printing more money.
Following World War I the Weimar Republic of Germany faced numerous challenges. They were saddled with crippling debts known as war reparations and they were facing inflation rates running as high as 60%, because wealthy Germans sought to move cash to hard assets and foreign assets as quickly as possible. It was into a high inflationary environment with full employment that the Weimar Republic chose to indiscriminately print money. Additionally, the rest of the world did not share Germany’s problems and currency traders were able to punish the Mark on global currency markets. We are in a deflationary environment and we have high rates of unemployment. And, outside of China the rest of the world does share our debt-induced deflationary depression. Germany experienced hyper-inflation because they chose to print money at the worst possible time. We have the ideal circumstances to print money in the U.S. In fact, if we don’t print a lot more money the economy is going to slide a lot lower. There is simply no other way to service all of the global debt. Whereas Germany threw gasoline on an inflationary fire, outside of a few speculative commodities we are desperate to spark inflation in the real economy. There is a time and a place for everything and now is the time to print.
The Fed needs to print enough money that policy makers in Washington will be relieved about worries over the national debt and the federal budget deficit. By taking near term debt worries off the table the Fed can clear the decks for Washington to come forward with a desperately needed massive job focused stimulus bill. There is no longer any reason to quibble about whether the last stimulus bill was adequate to restore economic growth. It is time for President Obama to admit the economy is in worse shape than his economic teams worst case projections. Unless the deficit and defense of the prior stimulus bill comes off the table we will not see a serious jobs bill emerge from Congress. It is up to the Fed to signal all is not well with the economy and to start aggressively buying U.S. Treasury bonds.
