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Here\u2019s why you should care about the Federal Reserve\u2019s latest round of bond-buying, announced Thursday by the central bank: One man has assumed the task of \u00a0getting the flagging U.S. economy back on track. He says he\u2019ll work for as long as it takes, all by himself if he has to. And he isn\u2019t even an elected official.<\/p>\n
The pace of new bond-buying \u2014 or quantitative easing, as it\u2019s technically termed \u2014 will lag behind that of similar action taken in the wake of the 2008 financial crisis, but the commitment is completely open-ended.<\/p>\n
\u201cTo support continued progress toward maximum employment and price stability, the Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens,\u201d reads the statement from the Federal Open Market Committee. Translation: The central bank is done with temporary measures. It\u2019s going to see this through until the job market is fully recovered and then some.<\/p>\n
That could be a while. \u201cThere\u2019s not a specific number we have in mind, but we see the last six months isn\u2019t it,\u201d Bernanke said at an afternoon press conference in Washington, in which he conceded the Fed alone lacks\u00a0\u201dtools that are strong enough to solve the unemployment problem.\u201d<\/p>\n
The current state of the U.S. economy is blah. The Federal Reserve\u2019s\u00a0new projections can be found here<\/a>, but to sum up: Inflation is in check; growth is happening, but barely; unemployment is coming down, but many people are still out of the workforce. There\u2019s been no fiscal pump-priming enacted by Congress since the end of 2010 and major tax hikes and spending cuts, part of last summer\u2019s debt ceiling deal, loom in January if Congress doesn\u2019t act. That dysfunction is part of the reason Bernanke has taken the job all on himself. (\u201cWe\u2019re looking for policymakers in other areas to do their part,\u201d he lamented at his press conference.)<\/p>\n So what does all this mean for President Obama\u2019s reelection chances? Probably not much. Despite an unsatisfactory status quo, the state of the economy probably hasn\u2019t disqualified him in the minds of most voters. If anything, minor progress over the past year is the reason he\u2019s slightly ahead of Mitt Romney in the polls. Monetary stimulus can help through the power of expectations\u2013data suggest<\/a>\u00a0that voters who pay more attention to the news have a sunnier view of the economy and the stock market is over the moon at the Fed\u2019s announcement\u2013but it\u2019s unlikely to jolt the recovery out of lethargy in the next few weeks.<\/p>\n If anything, the more politically meaningful recent economic news came out of Europe, where the continent\u2019s central bank announced its own bond-buying program last week and Germany\u2019s high court approved the European bailout fund on Wednesday. Upshot: A European financial crisis, one of the few cataclysmic events that could seriously damage Obama, is now much less likely to erupt before Election Day.<\/p>\n That doesn\u2019t mean the Fed\u2019s announcement isn\u2019t a political event. \u00a0Many Republicans had previously spoken out against any Fed action, and they may accuse Bernanke of trying to swing the election for the man who reappointed him; such critiques seem hollow, however, because Fed action in election years\u00a0is very common<\/a>\u00a0and many of those leveling this charge believe monetary easing hurts the economy rather than helps it.<\/p>\n While Romney\u2019s monetary views remain\u00a0largely opaque<\/a>, his campaign\u2019s response to Thursday\u2019s announcement hews toward the latter point. \u201cThe American economy doesn\u2019t need more artificial and ineffective measures,\u201d the statement reads. \u201cWe should be creating wealth, not printing dollars.\u201d Of course, should he be elected, Romney won\u2019t be able to set monetary policy. That power will still be Bernanke\u2019s, whose term does not end until January 2014. Until then, it\u2019s Bernanke\u2019s show.<\/p>\n Click to see original content<\/a><\/p>\n \u00a0<\/p>\n |\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014\u2014|<\/span><\/p>\n
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