Lets take a quick sample:
THE failure of the Congressional supercommittee to come up with any agreement on the budget deficit makes it even less likely that Congress will rise above its partisan divisions and act on behalf of the millions of out-of-work Americans.Yet without government intervention, we may well have high unemployment and social discord for years to come. How did this disaster happen?
Let's blow right by the supercommittee non-sequitor and focus on the second sentence: without government intervention.
YIKES.
He doesn't say "without FURTHER intervention"; he acts like nothing has been done!
Hey Bob, lets take a peek at the Fed's balance sheet:
No government intervention? Dude!
How about on the fiscal side?
Since 2007, We've more than tripled the Fed's balance sheet and more than tripled the Federal deficit. I think that qualifies as a fair amount of "government intervention" (am I weird to think that when automatic fiscal stabilizers kick in that counts as government intervention?).
Yes, long term unemployment is a big problem in this country. Will another $400 billion "jobs" program solve it or even noticeably reduce it? Will another round of quantitative easing solve it?
I think the problem goes far beyond a failure of "demand management"
3 comments:
It is, however, a bit misleading to stress the "tripling" of the Fed's balance sheet.
The Fed's increasing balance sheet has been its effort to increase the money supply despite the target funds and discount rates reaching their lower bounds (ignoring interest on reserves as an incentive away from creating money).
Of course, it does show that the Fed has attempted to take some action, but it's not nearly as dramatic to me as the "tripling" would imply. That's simply the result of the Fed shifting to a new way of increasing the money supply.
However, while the quantity of money seems to have increased, the velocity does not.
Angus, this is a great post! Simple, clear and to the point. We could spend all day with qualifiers (like the decline in velocity, etc), but this two graphics scream volumes.
The federal government has already intervened to pay unemployed folks to refrain from working for nearly two years.
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