HomeLatest ThreadsGreatest ThreadsForums & GroupsMy SubscriptionsMy Posts
DU Home » Latest Threads » Forums & Groups » Main » Editorials & Other Articles (Forum) » NYT.State-Wrecked: The Co... » Reply #5

Response to Ichingcarpenter (Original post)

Sun Mar 31, 2013, 10:22 AM

5. The Fed's actions pose no problem

It's the lack of fiscal policy response by Congress that really is putting us in a bind. Currency is draining out of circulation into the bank accounts of the 1% and the trade deficit. The only actor capable of replacing it is the federal government, which is, courtesy of its power to coin money, unconstrained in the amount of money it can inject into circulation. An increase in the deficit spent wisely would result in economic growth that would shift private sector actors from saving toward investment (not stock market "investment," but economic investment that increases productivity). Spent foolishly, a deficit increase would cause inflation, which would also drive savers into riskier, higher-return opportunities. Most likely is some mix of the two.

In truth, Bernanke has been doing his best to achieve the Fed's dual mandate given the limited toolbox at his disposal. Whether you prefer "liquidity trap" or "circulating currency drain," the only humane way forward is for Congress to act. The Fed just doesn't have the tools to fix this kind of problem.

Reply to this post

Back to OP Alert abuse Link to post in-thread

Always highlight: 10 newest replies | Replies posted after I mark a forum
Replies to this discussion thread
Arrow 6 replies Author Time Post
Ichingcarpenter Mar 2013 OP
dkf Mar 2013 #1
Ichingcarpenter Mar 2013 #2
dkf Mar 2013 #3
Ichingcarpenter Mar 2013 #4
dkf Mar 2013 #6
LineNew Reply The Fed's actions pose no problem
Lefty Thinker Mar 2013 #5
Please login to view edit histories.