September 15, 2012 Leave a comment
1) Ezra explains why this was such a big deal:
But the other part of the plan, and this part is really important, is that Bernanke just sent a signal to businesses and investors and the market and everyone else that the Fed is going to use its powers in a big, unusual way to get the economy moving. That’s a hugely important statement to make.
Imagine a business trying to decide whether it should hire more workers. The basic question it needs to answer is whether people will be buying a lot more stuff next year than they’re buying this year. If business owners don’t see any good reason to think the economy will improve, then the answer is probably, “No, people aren’t going to be buying more stuff next year,” so there’s no need to hire more workers.
But if they think the recovery is going to come, if they think people will be buying more stuff, then they need the workers. They don’t want to be caught without enough product — then their competitors would get those sales.
The Fed is trying to influence that decision. Fed officials are saying: “We’re going to use all our power to make sure there are people out there buying your stuff. So go hire. Do it now. We’re behind you.”
2) John Cassidy proves “Three Reasons to Salute Ben Bernanke.” Here’s #2:
2. The Fed chairman overruled the inflation hawks and put the interests of the unemployed before outmoded economic dogma. With inflation running well below two per cent and plenty of spare capacity in the economy, the notion that the United States faces the threat of hyperinflation, or even inflation that is modest but considerably higher than the current rate, isn’t credible. Still, many conservative economists, and even some people inside the Fed, have been arguing against a resumption of quantitative easing on the grounds that it would undermine the central bank’s ability to maintain stable prices.
3) Kevin Drum summarizes much of the unhinged (and completely ignorant of what actual economists think) reaction. Just to further demonstrate their economic interests, they suggest that this is a big boost to Obama’s electoral chances.
4) Brad Plumer explains that, as even someone with only a passing economic literacy (i.e., not your typical Republican member of Congress) realizes, any substantial effects probably won’t be felt for a good six months. If the Fed were really out to help Obama they would have done this long before now.