Editorial
The Charleston Daily Mail
9/17/2012
Federal Reserve Chairman Ben Bernanke’s decision to spend a half-trillion dollars a year for the next three years and maybe more is worthy of a new saying: Those who do not learn from history get to relive the 1970s.
For the third time, Bernanke will try “quantitative easing” – code for printing up billions of new dollars – to buy mortgage securities and Treasury notes in the hope of jump-starting the economy.
The quantitative easements of 2008 and 2010-2011 failed to drop unemployment below 8 percent. The numbers from this one are less than impressive:
* The Fed will spend $85 billion a month through December in this program – roughly a quarter-trillion dollars.
* After that, the Fed will spend $40 billion a month – roughly a half-trillion dollars a year – on this program.
* This could add 350,000 new jobs, according to Mark Zandi, chief economist of Moody’s Analytics.
* That works out to nearly $1.4 million printed up for every job gained.
* It could cause the unemployment rate to drop by just two-tenths of a percentage point over a year’s time – to 7.9 percent, according to Zandi.
This is a costly way to battle unemployment.
And it carries a risk of returning to the double-digit inflation the nation suffered in the 1970s.
This comes at a time when baby boomers – people born between 1946 and 1964 – have begun to retire. They have seen the value of their assets drop thanks to the burst of the housing bubble, and their incomes fall. Median household income in 2011 was its lowest in 16 years.
Inflation would punish them even further…
The editorial continues at The Charleston Daily Mail.
