Salutary Neglect

The overwhelming sentiment among my peers when I talk about this election is as follows: “Well, I’m disappointed in Obama, but I just couldn’t bring myself to vote for a Republican.”

When asked why, they will almost always reply, “Well I just can’t vote for someone who’s against gay marriage and pro-life.”

Are we really that naive? I’m a strong libertarian. I think the government shouldn’t be able to tell you what to do with your money, and I also think the government shouldn’t be able to tell you what to do with your body or who you can marry. Your right to swing your fist ends where my nose begins. But the view of most young voters is currently the status quo, and it takes absolutely no leadership, conviction, audacity, or skill for a politician to take a stance for or against either of those two issues. They’re not changing and everyone knows it.

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The Federal Reserve recently announced its third round of quantitative easing, otherwise known as QE3. Quantitative easing is defined by The Washington Post as “an unconventional monetary tool used by central banks to stimulate the economy … [the Federal Reserve] can buy up assets like long-term Treasuries or mortgage-backed securities from commercial banks and other institutions.”

QE3 amounts to printing finite and predetermined amounts of money. The first round was worth $1.4 trillion and the second round worth $600 billion. What makes the third round so scary is that the whole “predetermined quantity” aspect now goes out the window. With QE3, the Federal Reserve has committed to buying $40 billion in mortgage backed securities per month for an indefinite amount of time, causing it to be dubbed “QEternity” by publications such as Barron’s.

Printing money in methods like QE3 is often the last refuge of failed republics. This choice indicates that we are certainly not in a good economic spot, and things will probably worsen. The most surprising thing about QE3, however, is that several officials within the Federal Reserve don’t think it is going to make anything better at all.

According to Reuters, chairman of the Philadelphia Federal Reserve Mark Plosser has said he “believes that increasing monetary policy accommodation is neither appropriate nor likely to be effective in the current environment.” Similarly, when the massive QE1 and QE2 programs as well as the Operation Twist (which was basically cover for more asset buying) have managed to fail this whole time, it’s likely that QE3 will not be the magical exception.

Short-term inflation can often create the illusion of demand. Bolstering one failing sector in the short term will, at the very least, prevent things from getting worse between now and November.

Maybe Federal Reserve Chairman Ben Bernanke, like most Americans, just wants to keep his job. (more…)

Friday’s job numbers from the Bureau of Labor Statistics are just another one of the many painful reminders of the recent economic collapse and ensuing recession.

In the month of August, three times as many workers left the job market as found jobs. There was no wage growth and the vast majority of jobs gained were low-paying, and most were jobs serving alcoholic drinks, indicating a trend towards escapism. This is the fourth month in a row of dismal jobs numbers that on the surface seem hopeful (the unemployment rate fell from 8.3 percent to 8.1 percent), but are discouraging when you look into them.

This begs the question: Why is the economy still so bad? (more…)