Posted by Michael A. Kamperman on December 16, 2009
The Bernanke led Fed is divided. Some want to render more aid to the economy now. Others wish to withdraw support and head off future inflation. Both sides have agreed in a grand bargain to wait for more data and to wait until they have to make a real decision. The deadline is March 2010 when the current round of quantitative easing is scheduled to end. That is when the Fed is scheduled to end its purchases of Agency debt and of Agency issued mortgages. Until then they neither have to end or extend quantitative easing. The Fed is watching unemployment and capacity utilization. Between now and the end of March the private sector and the state governments will shed more jobs. The predictions by the leading economists are for the real economy to begin to add private sector jobs in the first quarter of 2010. It’s not going to happen. What is going to happen is the federal government will add almost one million temporary jobs to work on the 2010 census. But all of these jobs will end at the end of 2010. The Fed needs to back these jobs out of the next few unemployment reports to get a clear picture of where the economy is heading. Otherwise they may make a decision based on a false reading of economic vitality.
The CPI report showed the core rate of inflation is currently zero. This in spite of the dollar declining gold led rise in November oil prices. That trend has already reversed and the dollar has bottomed in the near term. It’s not because the U.S. is doing so much better. It’s because the veil has been lifted on the euro and the reality of the economic calamity facing countries like Greece, Spain, and Ireland has been laid bare. The CPI reports will soon trend negative. It is only the cold winter that is holding keeping the price of oil from collapsing. It is certainly not economic activity.
The Fed is definitely behind the curve. But it is not the inflation curve they are behind, it is the deflation curve. Prices will keep falling in housing and real goods in search of demand. The banks continue to tighten credit. The Obama Administration has chosen politics over economic substance in allowing Bank of America, Citi Group, and Wells Fargo to exit the Tarp. Despite raising money the capital ratios of all three of these firms fell when the Treasury redeemed its preferred stock. The deleveraging continues and even fewer loans will be lent to consumers and small businesses in 2010, despite the pleas from the President. The Fed needs to look at the big picture and needs to quit waiting and start printing more money ASAP. Manufacturing activity is already slowing down in the U.S., Germany, and Japan. And Christmas sales at the retail level are looking to be weaker than expected. Come January the false dawn of economic revitalization will become self evident and the Fed’s hesitancy will cost it valuable points in confidence. If the Fed had moved today to up their quantitative easing program businesses may have had the confidence to keep workers on and perhaps even to attempt to expand. But because the Fed is blinking employers will blink too. Unfortunately the Obama Administration is not only blinking on job creation, they are blind.
Posted by Michael A. Kamperman on December 11, 2009
In this morning’s New York Times Paul Krugman called on Ben Bernanke to ratchet up the Federal Reserve’s efforts to create jobs by printing $2 trillion. Krugman says the economy needs to create 300,000 jobs per month for the next five years in order to create the 18 million jobs necessary to return to full employment. The Keynesian econonomist ruefully acknowledges the appetite for a full scale fiscal assault on the economic crisis doesn’t exist in Washington and he is turning to Bernanke and monetary policy as the nation’s best option to create jobs. Krugman states “the most specific, persuasive case I’ve seen for more Fed action comes from Joseph Gagnon, a former Fed staffer now at the Peterson Institute for International Economics. Basing his analysis on the prior work of none other than Mr. Bernanke himself, in his previous incarnation as an economic researcher, Mr. Gagnon urges the Fed to expand credit by buying a further $2 trillion in assets. Such a program could do a lot to promote faster growth, while having hardly any downside.” While Joseph Gagnon is on the right track he underestimates the size and scale of quantitative easing necessary to end the credit crisis. Consider that Goldman Sach’s estimates that every $1.4 trillion worth of government securities the Fed purchases is equivalent to lowering the Fed Funds rate by 1%. Goldman further estimated the Fed Funds rate needs to be lowered another 6% in order for monetary policy to have enough teeth to get the economy moving again. The Goldman study estimates the Fed needs to print $8.4 trillion.
While I think Mr. Gagnon’s estimate is way too low and that Goldman’s estimates are also too low I am thrilled that Professor Krugman has kick-started the debate about why isn’t the Fed printing more money and just how much money does the Fed need to print. My own estimate is we should start with $10 trillion, though it will probably take $20 trillion, and virtually eliminate all of the outstanding U.S. Treasuries. This shock and awe strategy would restore confidence because the federal government would be almost debt free. It would also mean our President wouldn’t have to go to Asia and bow down before his bankers. And, it would free the Congress from concerns about the deficit allowing them to send the states the estimated $350 billion they will need over the next two years to close their budget deficits.
Imagine a world where the too-big-to-fail-too-yet-too-broke-to-lend-banks have no risk free Treasuries to invest in and are forced out on the risk curve with no option but to lend again? It is up to the Fed to take the “hide the money under the mattress” Treasury bonds away from the institutions. We have seen several Treasury auctions this month where the winning bidders accepted zero interest just to know their money was safe. One auction had demand for over five times the amount of Treasuries auctioned even though there was no interest to be earned. If I ran an institution I wouldn’t want my money in a maybe too big to fail bank, or in Dubai or Greece either. For those worried about the dollar if the Fed takes the plunge you can bet the Japanese and the Brits will be quick to follow. We are in a global debt-induced deflationary depression and it is up to the U.S. to lead the way out. Mr. Bernanke, to whom much is given, much is required.
Posted by Michael A. Kamperman on December 5, 2009
Many people believe major government policy errors such as attempts to balance the budget in 1937 worsened the effects of the Great Depression. The reported drop in the November unemployment rate from 10.2% to 10% comes at a critical juncture and significantly raises the risk the Obama Administration and the Fed will repeat the past and fail to provide the additional stimulus and quantitative easing the economy desperately needs. The mistake they will make is to believe the headlines in the November unemployment report which showed a loss of only 11,000 jobs, a .2% improvement in the U-3 rate, and an upward revision for September and October is a sure sign the economy and the jobs picture are on the verge of rapidly improving. What they will miss is the November unemployment report is an outlier and its conclusion that the jobs picture and the economy are rapidly improving are not supported by all of the other measurements of the November unemployment picture. For starters, the unemployment report’s own measurement of those unemployed 27 weeks or longer rose by 293,000. Additionally, the Labor Department dropped another 100,000 discouraged people out of the workforce and failed to add any workers for population growth. How did we only lose 11,000 jobs when so many people joined the ranks of the long-term unemployed and so many others simply dropped out of the workforce? ADP measured a loss of 169,000 private sector jobs and TrimTabs measured a loss of 255,000 jobs. While the four week moving average of weekly jobless claims did improve to 481,250, it is still a number that normally portends 6 figure job losses. The November ISM Services number weakened and reported continued softness in employment. Plus, November retail sales were soft and gasoline usage remains moribund in the U.S.
The Christmas season is a time of big swings in employment as temps are added in October and November and big layoffs occur in January. The Department of Labor statisticians use seasonal adjustments to smooth out these wide up and down swings in employment. One of the big factors in the adjustment is recent trends in the same month in the preceding years. November is always a big hiring month. But last year the economy lost 610,000 jobs in November in the post Lehman collapse. This data-point lowered the normally expected November hiring trends in the seasonal adjustment factor and gave an artificial boost to the seasonally adjusted jobs number. Hence the report showed the biggest adjusted gain in temporary workers in 5 years even though retailers were preparing for and getting a lean Christmas selling season. The November jobs report has given a false positive reading on the economy.
The Obama Administration and the deficit hawks in Congress will now proclaim the policies put in place to date have been sufficient to revive the economy. Never mind those policies were supposed to keep unemployment from rising past 8% and it is now 10%. The same wonks that missed the severity of the economic downturn are missing it again. Similarly, the inflation hawks on the Fed will now eschew further quantitative easing measures and will crowd out weaker private borrowers in 2010. Because these leaders saw a mirage of hope they will ignore data indicating all is not well and will wait for the next mirage. Hooverism reigns in the Whitehouse and minimalist ideas like cash for caulkers is all we can expect from here on out.
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 November 3, 2009
The economic recovery is totally dependent upon massive Washington stimulus, both fiscal and monetary. The Federal Reserve is meeting today and needs to expand its quantitative easing program, not end it. Similarly, the Congress needs to come forward with another massive stimulus bill focused on job creation. Credit remains very tight for both consumers and small businesses. For example, recent quarterly data shows credit card solicitation mailers fell from 2 billion a couple of years ago to 350 million. Both small businesses and consumers rely heavily on credit cards to maintain current spending levels. The mildly positive third quarter reading for the economy was the result of zero interest rates, cash for clunkers, the first time home buyers tax credit, and the stimulus bill. Without these measures from Washington the economy would have been decidedly negative. Yet the twin hawks, inflation and deficit, will worsen the depression if their point of view wins out. The inflation hawks are clamoring loudly for the Federal Reserve to detail an exit strategy from its current accommodative policy. The Fed will probably cave and throw these hawks a bone. Well I’m clamoring as loudly as I can for them to print more money and buy more U.S. Treasuries. They should keep on printing until the unemployment rate goes back under 8%.
The Congress should also keep coming forward with massive job bills until the unemployment rate falls below 8%. But neither the President nor the Congress have the political will to do something significant. The reason is the liberals are too defensive about their own policies and want to defend the failed stimulus plan as adequate. You can count President Obama amongst them. The conservatives are too distrustful of government and too anxious to see President Obama fail. That leaves the moderates, most of whom are deficit hawks. In fact Senator Bayh wants to establish a bipartisan commission to balance the budget. This commission made up of republicans and democrats would annually recommend both tax increases and federal spending cuts to tame the deficit. I cannot think of any economic policy scarier than raising taxes and cutting federal spending in the middle of a depression. Yet amazingly that is the glide path Washington is on at the moment.
The inflation hawks and the deficit hawks both have their world view shaped by an antiquated concept of money based on the worship of gold. In the ancient world gold was the best form of bartering for goods and services. Yet its supply was limited. In the modern world paper and paperless money (fiat) backed by the full faith and credit of strong governments is the best form of bartering. Yet unlike gold, printed money is not limited by physical supply. It is flexible and can be expanded or contracted by the government that issues it. In times of an over-heated inflationary economy the government needs to contract the money supply. The inflation hawks agree with this. Yet in times of a debt-induced deflationary depression the government needs to expand the money supply. The inflation hawks fear this because of a misunderstanding of the events surrounding the hyper-inflation experienced by Weimar Germany. The deficit hawks likewise see paper money and government debt as fixed, just like gold. They can’t seem to grasp that the federal government is not bound by the same rules as everyone else because they have the power to print more money. Why is it that the deficit hawks are obsessed with debt that we can print and pay-off at anytime? This depression could end in an instant and your loved ones could have jobs if the federal government would simply start printing money and spending money until the unemployment rate fell below 8% and the private sector economy could then take over. Instead you’re stuck with your jobless college grad kids’ moving back in so they can be protected from the mythical ravishes of future inflation and future federal debt. C’est la vie.
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.
Posted by Michael A. Kamperman on October 26, 2009
The number one issue in America is jobs. The number two issue in America is jobs. The number three issue in America is jobs. Yet somehow the Whitehouse remains tone-deaf to the cries and lamentations of the American people. The President is much more interested in minimalism when it comes to any job creation efforts than he is in risking raising the deficit higher than it already is. However, if you’re the world’s biggest currency manipulator named China and you complain about the U.S. printing money the President is all ears. If you run around saying we are stealing from our grandchildren by increasing the national debt the President is easily cowered. But if you are some poor Joe or Jane without a job the President is willing to give you a few more weeks of unemployment benefits, and not much else. He is certainly not willing to create a job for you.
A friend of mine lost his job as an architect one year ago. His unemployment benefits just ran out. Because of the commercial real estate bust no architectural firm is hiring. Its not that he can’t compete for a job, there are no jobs to compete for. What good will a few more weeks of unemployment insurance do him in the big scheme of things? When those checks run out there will still be no jobs available for him.
What the President needs to do is provide the change we can believe in that he campaigned on. Rhetoric and flowery speeches will not put food on the American workers table. We need action. The President should come forward with a two year one trillion dollar infrastructure bill that would repair or replace roads, bridges, federal government buildings, national parks, and schools in poor districts. The President should also remind the Fed that unemployment is their most important mandate right now, not inflation. He should have a meeting with Ben Bernanke and tell him if he doesn’t up the quantitative easing program at the next meeting he will pull his nomination for a second term. Basically, we need for the President to become proactive on the jobs front and take charge. Finally, he should fire all of his economic and political advisers that are counseling him to worry more about the deficit than about jobs. It is simply stunning how President Obama has surrounded himself with the same type of liquidationist advisers that President Hoover surrounded himself with during our last debt-induced deflationary depression. President Obama, you will not be able to re-create 10 million missing jobs on the cheap.
Posted by Michael A. Kamperman on October 14, 2009
It may happen as soon as tomorrow. The core rate for CPI includes everything except for volatile food and energy prices. Over the last 12 months the overall CPI rate has declined by 1.5%, primarily due to a pullback in food and energy prices. But for the most part the Core CPI rate has risen slightly month after month despite rampant deflation. Over the last year the CPI has calculated that rents and owner’ equivalent rents (the economist’s substitute for home prices) have risen by an annualized rate of 1.8%. It is mindboggling that the federal government’s statisticians have been using the cost of renting shelter as a substitute for actually buying a house. Everyone knows home prices have dropped dramatically during the last 2 years. The reason the Core CPI rate is about to turn negative is rents are now rapidly falling throughout the U.S. Rent and owner’ equivalent rent combined account for 30% of the overall CPI calculation. Importantly, they account for 40% of the Core CPI calculation. Most economists and investors pay much closer attention to the core rate than to the overall rate due to the volatility of food and energy prices. This summer apartment vacancies reached 7.8%. Landlords are forced to lower prices to attract tenants. Once the Core CPI rate turns negative it will confirm the U.S. is in a deflationary spiral brought on by the credit crisis.
The CPI rate is built into many contracts and negotiations in the U.S. Most employers’ base raises for employees on a cost of living adjustment, plus potentially something extra for merit. With the Core CPI rate trending negative the only raises given to U.S. workers will be for merit. Stagnant and potentially falling wages in the U.S. will only lead to lower prices as consumers and businesses are strapped with excessive debts. They need the forces of inflation to raise their incomes and the prices of their assets to service their debts. This year people on Social Security did not receive their usual annual cost of living raise. Less income will lead to lower top line revenues for businesses. This will mean cost cutting will be the only way maintain or grow profits. In the U.S. cost cutting for businesses is code for more layoffs. Getting out of this deflationary spiral will be very difficult because of the way incomes in the U.S. are tied to the CPI rate.
The Fed is currently pushing on a string and has been unable to get the Zombie banks to increase lending. The only way to fight deflationary expectations is for the Federal Reserve to print a lot more money. Yet some members of the Fed would like to exit their quantitative easing program believing the economy is recovering and inflation is around the corner. These attitudes should change once the Core CPI rate confirms deflation. The good news is the release of minutes from the Federal Reserve’s last meeting showed that some members of the Fed are still open to upping the quantitative easing program.
Posted by Michael A. Kamperman on October 9, 2009
Some Governors at the Fed have recently been speaking out about the need for a rapid exit strategy from the Fed’s accommodative policies. They must think a speculative pop in the markets is equivalent to price stability and economic stability, which are the two things the Fed is charted by Congress to focus on. Is the home listed from a realtor down the street from you in a bidding war? Is your friend from college who has been unemployed for a while inundated with job offers? The American people are suffering. They are unemployed and they cannot sell their home because their mortgage is underwater. The objective of the hawkish Fed governors speaking about the need to have a rapid exit plan is not intended to push for interest rates to be raised in the near term. The comments are intended to push for an end to quantitative easing and the other policies the Fed has put in place to provide extra support to the economy. To date the Fed has done too little, not too much. Consumer credit fell another $12 billion in August despite getting a big boost from auto loans because of the cash for clunkers program. The banks are continuing to tighten credit standards. Auto sales fell back to extremely depressed levels in September as soon as the clunker program ended. Home prices will begin falling again now that the first time home buyers tax credit is no longer driving home sales. How could anyone at the Fed be worried about exit strategies when the real U-6 unemployment rate is 17%.
The hawkish Fed governors are simply too concerned about inflation returning. They see the dollar falling and gold reaching new highs and they assume the markets are signaling significant inflation is just around the corner. Not a chance. Real wages in the last unemployment report rose by only a penny over the preceding month. Hours worked fell to 33.0. Every industry has significant amounts of idle capacity. Inflation comes from too many dollars chasing too few goods. Since over half of the country has a subprime credit score, access to cash to purchase goods is restricted. Since industrial capacity is still way below 80%, there is no shortage of goods in any sector of the economy. Until these dynamics change there is no reason to fear inflation. It doesn’t matter how high gold gets, because the fundamentals of the economy will not support inflation.
What the hawkish Fed Governors should be panicked about is deflation. The fundamentals of the economy point to deflation. In the Great Depression deflation ended in 1933 after FDR declared a bank holiday and created FDIC, which ended the bank runs and brought money out from under the mattresses and back into the banks. He also ended the physical exchange of paper dollars for gold. He ordered the conversion of gold money for $20.67 per ounce in U.S. paper dollars. Then, in January of 1934 FDR devalued the dollar by 40% by raising the gold per ounce conversion rate to $35. We have no such tricks up our sleeve today to end deflation. What we do have to end deflation is quantitative easing. The Fed Governors need to be talking about why they need to print more money rather than how quickly they are prepared to withdraw support for the economy.
Posted by Michael A. Kamperman on October 4, 2009
Vice President Joe Biden has been the Whitehouse’s point man on implementing and defending the failed stimulus bill. After Friday’s unemployment report he bailed on being the sacrificial lamb for the President’s political and economic advisers. He said “We don’t think that ‘less bad’ is good. ‘Less bad’ is not our measure of success. One job lost is one job too many, and it’s still too much pain. That is not what the American people were promised.” How could he possibly defend the stimulus bill or the other economic programs as working in light of Friday’s unemployment report? It was so bad the government itself lost 53,000 jobs. There were 15,000 teachers who were not returned to the classroom. The stimulus bill is not only failing to create jobs, it now not even saving the jobs of state and local government employees, or even teachers. Financial support for state and local governments and for schools was a key component of the stimulus bill. But stimulus support from the federal government is simply insufficient to make up for the lost tax revenues the states are experiencing. State governments are being forced to either raise taxes or cut spending. In many cases they are doing both. This is precisely the wrong response to dealing with a severe economic contraction in the private economy. Total tax revenues from all sources fell by double digits in 39 out of 50 states in the second quarter of 2009 compared to the second quarter of 2008. The economic contraction is so severe that sales tax revenues in all of the states fell by 9%. There is no better measure of consumer spending than sales tax revenues.
The cause of continuing job losses is not the stimulus plan. There is no doubt things would be even worse if nothing were done. But we need Washington to succeed in solving problems and not just say at least we tried. The real reason we are still hemorrhaging jobs is the stress test of the banks. Treasury Secretary Timothy Geithner supported Wizard of Oz style smoke and mirrors over the politically painful steps of fixing the broken credit markets. He should have created a “bad bank” to absorb the toxic assets, he didn’t. He doesn’t even want to encourage the FDIC to borrow money directly from the Treasury now that it is obvious it is broke, even though the FDIC has a $500 billion unsecured line of credit already set up with the Treasury. Remember, the stress test’s worse case assumption was that unemployment would not rise above an average of 8.9% in 2009. If not for removing 1.5 million people from the labor force the unemployment report would have already reached 11%. The banks cannot side step the fact that the real unemployment rate is much higher than the stated unemployment rate. People without jobs cannot pay their debts no matter how the statisticians in Washington categorize them. The losses at the banks will be much higher than the worst case scenario modeled by the Treasury. Therefore, they do not have enough capital and that is the reason they are not lending. Zombie banks do not lend.
The creative destructionist on the Fed and the liquidationists in the Obama Whitehouse are reaping what they have sown. The Whitehouse and the Fed have been talking tough on the need to reign in the deficit. The Fed has been talking tough about rapidly withdrawing monetary support to prevent the return of inflation. The Fed is concerned about the appearance of their independence. What the Fed should be concerned with is they are talking about withdrawing monetary support when they should be talking about adding it. They will add it. The Fed will back pedal and up its quantitative easing program. This reminds me a lot of August of 2007 when the Fed met in the first week of August and refused to lower interest rates. Less than three weeks later they started cutting rates drastically in an emergency session. The unemployment report and the state sales tax reports are better indicators of future Fed policy than tough talk. The Whitehouse has no political option but to back pedal come forward with a real job creation plan. Even the New York Times has turned against the President and his economic policies. Here is what the Times said in its editorial this morning “If successful, ambitious goals like health care reform and energy legislation may generate jobs, but officials have not persuasively linked them to job growth. Congress and the administration also have not done enough to directly create jobs. That could be done with more stimulus to spur job creation, or a large federal jobs program, or tax credits for hiring, or all three. Or surprise us. Just don’t pretend that the deteriorating jobs picture will self-correct, or act as if it is tolerable.” Ouch! The talking heads on the Fed and in the Whitehouse look like economic fools. At least Joe Biden is done with being made to look like one.
