Bernanke: Trying to save Obama?
The Federal Reserve has announced a third wave of “quantitative easing.”
The U.S. economy got a badly needed boost last week, said Josh Barro in Bloomberg.com. The Federal Reserve announced a third wave of “quantitative easing”—printing money to buy bonds from big banks to keep interest rates down. But where two previous efforts by the Fed to pump money into the system have been temporary, “QE3” will be open-ended, and thus vastly more effective. Ben Bernanke, chair of the Federal Reserve, has pledged to buy $85 billion of mortgage bonds every month until January, and another $40 billion every month after that for as long as necessary. The assurance of long-lasting Fed stimulus will boost stocks and home-buying, making consumers feel more confident, and more inclined to spend money—leading to new hiring. “It’s a win-win-win.” For a long time Bernanke was resistant to QE3, said John Cassidy in NewYorker.com, because of intense Republican opposition. But slowing economic growth and stubborn unemployment made him decide the Fed had to act.
Bernanke’s desperate intervention is not only unlikely to save the economy, said Larry Kudlow in NationalReview.com. It’s a “blunt admission that Obamanomics has completely failed.” The Fed has already spent $2.35 trillion on previous bond-buying schemes, with no apparent impact on the economy. Further quantitative easing will only weaken the U.S. dollar, drive up food and energy prices, and hurt the middle class. As Mitt Romney said last week, “we should be creating wealth, not printing dollars.” And why choose to bail out Obama now? said Investor’s Business Daily in an editorial. “A major Fed action coming just before an election is highly suspect.”
If Bernanke’s goal was to influence the election, said Michael Tomasky in TheDailyBeast.com, “he’d have done this in the summer.’’ QE3 won’t have much of an impact on the economy before November. He’s also made it clear that the Fed’s influence over the economy is limited, said The Washington Post. Only the president and Congress can restore real confidence, by devising a “credible fiscal plan” to get the deficit under control, and avert the fiscal cliff looming at the end of the year. Bernanke’s bond-buying program has bought both sides some time. If our elected leaders continue to delay the day of reckoning, we’ll be in the same sinking boat as Europe.