Letter: Just like a drug addict
Recently the president of the Minneapolis Federal Reserve said that the Fed needed to do anything it could to bring down the unemployment rate.
First, the major tool that the Fed has to fulfill its mandate is monetary policy by increasing or decreasing the money supply. The Fed started with QE 1 (“quantitative easing”) and then QE 2. Chairman Ben Bernanke did not want to do QE 3, in which he is printing $85 billion per month to buy the government debt at artificially low rates. He told Congress that it had to use proper fiscal policy (taxing, spending and regulations) to achieve private-sector economic growth.
Congress said “No” to sound fiscal policy and told the Fed to keep printing more money.
The Fed’s QE 3 policy is not affecting the job growth to lower the unemployment rate, but the Fed will not admit that its monetary policy cannot affect the job growth we need to bring our unemployment rate down to lower than 6.5 percent.
The Fed has taken on the role of a drug dealer enabling the drug addict to take more drugs to make him feel good. That drug addict is the federal government and the drugs are printed money by the Fed. This money printing allows the Fed to buy Treasury notes at artificially low rates that allow the deficit to look lower than it really is.
The answer is for Congress to present a sound fiscal policy for the president to negotiate. If that happens, private-sector economic growth will take the place of government deficit spending, and full-time jobs will be created and the U.S. economy will grow again.