A pattern begins to develop within economic and financial circles: Those who believe that further monetary action will produce Results; and Those who believe that all structural changes must originate elsewhere than in the financial world. I belong to the latter Camp. I think that Bernanke has dug the Fed into a Hole, and intends to widen it into a Grave. The Fed already has too many illiquid assets on its books, an no ability to alter course without impacting the Dollar adversely; something which will not improve Trade in the current environment. What I worry about the most consists of the fact that the Fed loses elasticity with such involvement in the economy; losing its ability to be a floating fund in case of need for Recession reversal. It remains especially troubling as I expect that the Fed can initiate no action at this time which could improve business conditions. It all calls for Government action, not financial action.
Readers will probably want to understand what and why monetary policy could not have much effect. Read through this Post all links, which will give some better understanding of the issue. I do not agree with the author’s summation that the Fed should take action, but it stands clearly that such Fed action would be marginalized at best. What becomes the rationale for more Cash on Hand, if Business will not expend the Cash? Business does not want to expand into Hiring, even if they could be enticed into capital investment. We cannot get the Consumer Demand without further Hiring, and the Fed spreading more Cash will not do the Trick.
Readers will Now want some Answers of what will work to restart the Economy. They should read my Post of yesterday, and I will follow with the Statement that Government must enter the old CCC mentality, though mostly affixed to the local area and conditions. I would pass a Junk Removal Act, run by local area Maintenance, where Labor will be employed for Minimum Wage with health care under local supervision; all in order to remove Eyesores and other elements. These Crews will tear down older structures, clean Lots, and tear out unwanted capital investment for limited Cost to Property ownership. This Act would be directed at unemployed Youth, but also Any whose Unemployment benefits have run out. Local participation can be obtained by a Fine system for untended Property after a certain date. The Act should also include free Labor for elderly low Income individuals which does not include health care provision. There are other endeavors which can be utilized, and it is time to use them. lgl