Wednesday, June 20, 2012

I think the Fed knows that it is impotent

There is a nice article in today's Post-Dispatch outlining the Federal Reserve's options for "providing further support for a slumping U.S. economy."  Notice this wording, which matches what the Fed has been saying for a while.  They are not looking to reverse or stimulate the slumping economy.  They merely want to support it, which is about all that it might be able to do. Because the slumping economy has nothing to do with monetary policy, there is nothing that the Fed can do to reverse the slump. Our problems are structural and can only be addressed by revising the tax code, stripping away onerous regulations, resolving the uncertainty about future policies, etc.