The recent meeting of the Federal Open Market Committee (FOMC) drew significant public interest. What themes were explored during those discussions?
Primarily, they focused on price controls, specifically regarding the economy’s most vital asset: its currency. By regulating the value of money, they can impact the prices of goods and services across the board.
Some proponents argue that this approach will benefit consumers, stimulating demand and potentially igniting a hiring surge. However, we remain skeptical.
The Federal Reserve operates under the assumption that with the perfect combination of policies, the economy can be rejuvenated. Yet, this begs the question: what constitutes the right mix, and how can a small group of officials interpret data to achieve it?
After deliberating for several days, they determined to continue offering federal loans at nearly no interest. Additionally, they decided to maintain their practice of creating money—about $85 billion a month—for the purchase of Treasury and mortgage bonds until unemployment decreases to 6.5 percent. This method, commonly known as quantitative easing, is designed to suppress interest rates, allowing both the government and homebuyers to borrow at historically low costs. Essentially, it fosters an environment of increased public and private debt.
Where are the Jobs?
Curiously, at no point did we detect an acknowledgment from the Fed that there’s no such thing as a free lunch. A closer examination of their jargon suggests a misplaced belief that Fed-created money will enhance the economy, reduce unemployment, and lead to widespread prosperity. The idea appears to be that manipulating monetary prices will provide consumers with abundant goods without any labor required.
The stark reality, however, tells a different story. The repercussions of price manipulation are as real as the fallout from reckless driving. Furthermore, any positive impacts from the Fed’s initiatives have yet to materialize, leaving the economy once again struggling as we approach the second quarter’s conclusion.
As reported by the Los Angeles Times, “Private-sector job growth slowed more than expected last month, with employers adding just 119,000 net new positions—a troubling sign of a stalling labor market, according to payroll processing firm ADP.” This marked the second consecutive decline in this commonly referenced metric, showing the slowest growth since September. Moreover, ADP revised its March figures down from an original estimate of 158,000 to 131,000.
What’s happening? With almost $2.5 trillion added to the monetary base over the last four years, shouldn’t we be seeing significant economic growth?
Overloaded With Debt and No Jobs to Be Had
Despite Ben Bernanke and the Fed’s relentless efforts, Washington has been inadvertently working against them. The combined effects of increased payroll taxes and federal spending cuts have hit the economy hard, like a blunt instrument.
Today we’ll learn whether the Labor Department’s April jobs numbers differ significantly from ADP’s findings. There’s also the matter of job quality, which has proven disappointingly low…
For many recent graduates, professional opportunities remain elusive. Research from Spectrem’s Millionaire Corner reveals that “four-in-ten working Millennials who graduated from college in the past two years rate their career paths poorly.”
“According to Accenture’s 2013 College Graduate Employment Survey, 41% of over 2,050 Millennial respondents reported being underemployed in roles that don’t require their degrees.”
Additionally, the New York Fed reports that the average student loan balance for 25-year-olds has surged 91% over the past nine years, from $10,646 in 2003 to $20,326 in 2012. Clearly, something is amiss here, and rising stock prices alone cannot remedy the situation.
Sincerely,
MN Gordon
for Economic Prism
Return from Overloaded with Debt and No Jobs to Be Had to Economic Prism
