Enter you email address and zip code to set up customized email alerts.
Image: By Paul Nicholson on flickr
Anything that reeks of "stimulus" -- fiscal or otherwise -- is seemingly a non-starter.
One dissenter on the right is Ramesh Ponnuru at The National Review who has been advocating looser monetary policy and even a tolerance for more outright inflation.
Others, like Tyler Cowen, have been embracing inflation/loose money as well with the idea being that: In a country of debtors, the easiest way to make those debts "shrink" is to make the value of assets grow via inflation.
In theory, we don't have a big problem with this. Sure it screws over savers, and it privileges non-asset owners at the expense of, say, home-renters, but if you think the biggest problem in the economy is people who are underwater on their homes (etc.) then this sounds reasonable.
Here's the problem: The Fed just can't make this happen.
Bernanke doesn't just have an inflation button.
QE (or any other vaguely conventional tool) does not accomplish the inflation that people want it to. Buying bonds from banks doesn't make the value of a house go up. To the extent that the last bout of QE created inflation it happened in commodities*, which is actually the worst possible thing, because it's deflationary to the rest of the economy (money sucked out of households for gasoline or corporations for raw materials means less money to spend on wages and other costs).
When people say they want inflation to help combat debt, what they really want is something like George W. Bush's first-term tax rebate, where every person in the country got a check from Treasury. That's literally a way of printing more dollars, and reducing the relative weight of household obligations.
But that's fiscal policy! That has to be done via Congress (something that seems near impossible right now).
But anyway, if that's what you want, don't complain that Bernanke isn't doing enough. Call your Representative.
*Regarding QE and asset inflation: The basic theory is that by forcing investors out of Treasuries, the Fed causes money to flow into other assets (other instruments with yield, stocks, commodities, etc.). One defense of this is that propping up asset values creates a wealth effect. The downside, again, is that gas and other commodities cost more. Furthermore, while this kind of portfolio adjustment may be good for financial assets related to housing (e.g. mortgage-backed securities) it doesn't do anything for actual housing itself.
Please follow Money Game on Twitter and Facebook. Follow Joe Weisenthal on Twitter. Ask Joe A Question >
To embed this post, copy the code below and paste into your website or blog.
Active Users on BI right now...Click for more live stats »
| Stealth QE3 Is Upon Us, How Ben Did It, And What It Means 24
Understanding today's big news.
| Get Used To Slower Chinese Growth
| The U.S. Treasury And Dollar Will Weather The Storm, S&P Downgrade And Assailing China 18
| Perpetual ZIRP And The One-Way Street 32
| From Riches to Riots
| The Chairman of the Federal Reserve is Clueless
| There Is No Recovery"¦ It's All Been Just More Debt
| Dead Money and Fear; How do I exploit that scenario"¦....
| Société Générale Bankrupt? Rumors Send EUR/USD Down
| Gold & Silver Prices - Daily Outlook August 10
| What are you teaching your kids?
Hacker Group Anonymous Vows To Destroy Facebook On November 5 339,765 Views
Cartoons From Around The World About The Market Crash 134,049 Views
The 18 Coolest Business Cards We've Ever Seen 110,690 Views
Amazing Pictures Of New York's Next Subway, Under Construction Right Now 104,172 Views
15 Very Common And Absurd Google Searches 91,311 Views
Hacker Group Anonymous Vows To Destroy Facebook On November 5 204 Comments
A Quick Theory About That Disastrous Obama Speech 157 Comments
STOCKS DESTROYED AMID GLOBAL DEBT FREAKOUT: Here's What You Need To Know 141 Comments
CRASH: DOW OFF 600, NASDAQ OFF 6%, S&P OFF 6.21% 96 Comments
Obama: "No Matter What Some Agency May Say, We've Always Been And Always Will Be A 'Triple-A' Country" 94 Comments
* Copyright © 2011 Business Insider, Inc. All rights reserved. Registration on or use of this site constitutes acceptance of our Terms of Service and Privacy Policy. | Disclaimer
Powered by MongoDB | Hosted by Datapipe | Web analytics by Empirical Path
Read Full Article »