Pro-con on Federal Reserve’s latest ‘monetary easing’

If the economy falters from here on out, it will be difficult to blame the Federal Reserve. Ben Bernanke, the Fed chairman, and all but one of the other members of the Fed policy committee, took decisive steps on Thursday to spur the economy, pledging to buy $85 billion worth of assets each month until the end of the year and to continue pumping money into the economy until the job market improves “substantially.” The open-ended nature of the plan and its linkage to jobs are welcome changes from previous interventions. Will the latest approach work? No one knows for sure because each new round of strong monetary easing is to some degree experimental. What is known is that fiscal policymakers – that is, Congress – have failed to step forward with stimulative policies, largely because Republicans have refused to even consider measures to hire teachers, rebuild schools and otherwise create jobs. The economy needs more help than the Fed can provide. But the Fed is to be applauded for doing what it can. – New York Times

Chairman Ben Bernanke and his music men at the Fed’s Open Market Committee put on their party hats Thursday and unleashed an unlimited program of monetary easing. The move exceeded even Wall Street’s expectations, but whether it will help the real economy in the long term is doubtful. This is the Fed’s third round of quantitative easing (QE3) since the 2008 panic, and the difference this time is that Ben is unbounded. The Fed said it will keep interest rates at near-zero “at least through mid-2015,” which is six months longer than its previous vow. The bigger news is that the Fed announced another round of asset purchases – only this time as far as the eye can see. Bernanke forswore any partisan motives on Thursday, and we’ll give him the benefit of the personal doubt. But by goosing stock prices, and thus lifting the short-term economic mood, the Fed has surely provided President Obama an in-kind re-election contribution. The irony is that, with this historic and open-ended easing, Bernanke is also tacitly admitting how lousy the Obama-Bernanke economy really is. – Wall Street Journal