Breaking news: officials in our U.S. Federal Government do not know how to solve all our woes.
This actually shouldn’t be “news.” Leaders from none other than the Federal Reserve, itself, have repeatedly admitted this in recent months.
Fed Chairman Ben Bernanke has admitted this multiple times, and in a variety of different contexts (a point I’ll review momentarily). But last Wednesday, the President and C.E.O. of the Federal Reserve Bank of Dallas reiterated this point himself, and his announcements have largely been ignored.
In a Speech before the Harvard Club of New York City, bank President Richard Foster publicly restated his opposition to the Fed’s recent decision to launch “QE3,” its third attempt in three years to use monetary policy to stimulate the economy. Foster began his speech noting that “with each program we undertake to venture further in that direction (in the direction of using monetary policy as stimulus), we are sailing deeper into uncharted waters. We are blessed at the Fed with sophisticated econometric models and superb analysts. We can easily conjure up plausible theories as to what we will do when it comes to our next tack or eventually reversing course. The truth, however, is that nobody on the committee, nor on our staffs at the Board of Governors and the 12 Banks, really knows what is holding back the economy.”
Later in the speech, Mr. Foster noted that our economy “is already flush with $1.6 trillion in excess private bank reserves owned by the banking sector and held by the 12 Federal Reserve Banks. Trillions more are sitting on the sidelines in corporate coffers. On top of all that, a significant amount of underemployed cash—or fuel for investment—is burning a hole in the pockets of money market funds and other non-depository financial operators. This begs the question: Why would the Fed provision to shovel billions in additional liquidity into the economy’s boiler when so much is presently lying fallow?”
The economy is being held back despite trillions of dollars “lying fallow,” and the highly educated experts at the Federal Reserve can’t figure out why. Mr. Foster deserves our thanks for being so truthful – yet we should all be concerned about his observations.
Of course, it was only three months ago when Chairman Ben Bernanke admitted that he had “no idea” why our economy is so “fragile.” This is the man who has overseen the lending of more than $3 trillion American taxpayer dollars to foreign banks; the rapid-fire acquisition of the former giant Merrill Lynch by the gargantuan Bank of America; the multi-billion dollar taxpayer bailout of Wall Street; and – although he craft legislation or sign bills in to law, he nonetheless supported the $800 billion “economic stimulus bill” from the Congress and the Obama Administration.
And after all that – and before the latest stimulus effort announced less than two weeks ago – the Fed Chairman nonetheless admits that he has “no idea” what is wrong with our economy.
The talent, econometric models, and superb analysts at the Federal Reserve notwithstanding, Americans of all stripes need to come to grips with some basic economic realities. If it is still a goal of our country to create wealth and opportunity for all, then we’ll have to start demanding that our government officials think and act differently.
For example, we will not have entrepreneurs once again using those “fallow trillions” to create new businesses and jobs in large quantities, until we demand that government stops bullying private enterprise. Despite the claims at the recent Democratic National Convention that President Obama “saved G.M” with government bailouts, last week General Motors announced that it wants to sever ties with our government. According to G.M. leadership, the restrictions on executive salaries that President Obama has forced upon the company have put G.M. at a competitive disadvantage with other car companies.
The fact that the Obama Administration would use an entire car company to satisfy its political agenda of cutting executive salaries, even at the expense of the company’s wellbeing, does not create a business-friendly environment. It conveys to entrepreneurs that President Obama’s agenda is preeminently important, and prosperity is secondary.
And did you hear about the Gallup organization? After publishing both political polling data and unemployment data that reflected poorly on the President, Obama campaign strategist David Axelrod engaged Gallup in a series of intimidating conversations demanding that Gallup change their methodologies. Gallup didn’t budge – and mysteriously found themselves targeted with a lawsuit from the Department of Justice lawsuit over an “unrelated issue.”
Americans must also demand that both Washington, and Wall Street, embrace the economic wisdom of Main Street. Most of us realize that, just as a drunken person cannot drink himself sober, no individual, household, nor organization can borrow and spend itself out of debt. This reality applies to our government, as well.
Americans deserve, and must demand, better.
Austin Hill is an Author, Consultant, and Host of "Austin Hill's Big World of Small Business," a syndicated talk show about small business ownership and entrepreneurship. He is Co-Author of the new release "The Virtues Of Capitalism: A Moral Case For Free Markets." , Author of "White House Confidential: The Little Book Of Weird Presidential History," and a frequent guest host for Washington, DC's 105.9 WMAL Talk Radio.
I Was A Woman In The Marine Corps In the Mid-70s. Hillary Clinton’s Story Doesn’t Add Up | Susan Hutchison