The Fed’s policy-making Open Market Committee is meeting today and people expect…I’m not sure what.
Ben Bernanke and crew can’t stop American companies from continuing to shed jobs (Abbott today cut 3,000 to pocket the gains from acquiring Solvay); or even slow the migration of work to lower-cost countries.
They can’t address trade deals that close American factories and fail to deliver enough export jobs to replace the losses. They can’t make investments in 21st century infrastructure, or help schools, transit systems or state governments. Nor can they invest in American universities to stop destructive cutbacks. Lend to small business? Work out underwater house loans? Not the Fed.
So even though a Fed announcement may come out as I write this, I suspect it will be something about holding steady but being ready to take robust action if needed. (As indeed it did). Predictability is no small gift, and the Fed did act strongly during the Great Panic, if the result was controversial. Bernanke would probably like to use the central bank’s arcane powers to indirectly stimulate the economy. He lacks the consensus on the board.
Meanwhile,the Fed has a balance sheet stuffed with toxic “assets” from the bubble and Treasuries already purchased to steady the economy. Interest rates are essentially zero but in the banking system credit remains problematic, both in the size of bad bets that must be worked out and in the frustrations of good customers who can’t get loans.It’s hard to know how the FOMC can fix that.
So, lacking another monetary crisis, such as deflation, the key to happiness with the Fed seems to be low expectations.
Today’s Econ Haiku:
A new Dick’s Drive-In
That’s a sign of expansion
At its tastiest