Janet Yellen is no masseuse. Nor is she a pecuniary zeus. Her economic policies sting like grapefruit juice and sound as silly as Dr. Seuss.
My name is Uncle Sam. Uncle-Sam-I-am. I do not like quantitative easing. I call it greenbacks and ham.
Meeting notes released last week from the Federal Reserve’s latest policy-making committee meeting indicate that the Fed has indefinite plans to continue its bond-buying campaign. The New York Times suggests the Fed will replace its existing timeline for keeping interest rates around zero percent with no end mark. (The current timeline is already quite vague: a “considerable time,” which is generally interpreted as upwards of six months.)
Many experts had anticipated that the Fed would raise rates soon, but The Times explains that the agency’s meeting notes indicate “…officials are trying to find a new way to say the same thing [as a ‘considerable time’].” Financial commentator Peter Schiff told Yahoo! Finance he now believes the Fed is heading toward “QE Infinity.”
The majority of the officials currently serving on the Fed’s policy-making committee contend that QE is working. Unfortunately, the only freethinking dissenters—Federal Reserve Bank of Philadelphia president Charles Plosser and Federal Reserve Bank of Dallas president Richard Fisher—will soon be retiring.
This summer, Fisher warned that with the Fed’s current policy: “We are at risk of doing what the Fed has too often done: overstaying our welcome by staying too loose too long.” He added: “We risk not only doing damage to the economy but also being viewed as politically pliant.”
Fisher and Plosser’s peers are convinced that QE is responsible for economic improvement. Yellen told the press last month: “We have come far from the worst moments of the crisis and the economy continues to improve.” However, the idea that the Fed has improved the U.S. economy while enlarging its balance sheet is as silly as Dr. Seuss’ tale of green eggs and ham.
Here are the facts:
September 7, 2014: The Lost Angeles Times reports that entrepreneurial startups have dropped 28% since 1977. A few giants (i.e. Wal-Mart) are thriving while small business owners are floundering. Millennials in particular are relinquishing their entrepreneurial dreams.
September 14, 2014: Bureau of Labor Statistics data indicates that while the official unemployment rate is falling, Americans are seeing virtually no gains in wages.
The Associated Press reports that if the economy were healthy, the “churn” rate would be higher: more Americans would be leaving their jobs for higher-paying jobs or starting their own companies than are currently doing so. Meager earnings growth is a sign of a weak recovery because wages tend to increase by more than two percent when overall economic productivity (output per hour) increases.
September 19, 2014: The Wall Street Journal reports that the bulk of economic gains have been felt by a select few—America’s wealthiest individuals—excluding the middle class and working poor.
September 20, 2014: The New York Times reports that Chinese are the leading foreign investors in U.S. real estate, spending $22 billion between March of 2013 and March of 2014. The average Chinese investor can afford a home purchase of $523,148—twice that of the average American buyer.
October 5, 2014: The Federal Reserve Bank of Atlanta releases a report showing that in 2012 only 49% of Americans employed part-time (defined as working less than 35 hours a week) were able to find full-time employment within 12 months.
In 2006—before the Great Recession and what First Lady Michelle Obama has called her husband’s “huge recovery”—61% of Americans were able to move from part-time to full-time work within a year’s time.
October 7, 2014: New York’s historic luxury hotel, the Waldorf-Astoria, announces that it will be purchased by a Chinese insurance company for $1.95 billion, the highest price for which any solo standing U.S. hotel has ever been purchased.
It’s doubtful that QE is truly revitalizing our economy when you consider the lackluster economic trends above alongside the American companies that are slashing benefits (think Wal-Mart’s decision to cut health insurance benefits for 30,000 part-time workers) or laying off workers (Microsoft plans to cut up to 18,000 workers within the next nine months; Time Warner will slash 1,475 positions globally; and Hewlett-Packard will cut 5,000 jobs and Cisco will eliminate 6,000 positions as part of their respective restructuring programs).
Let’s try something different. For example, let’s take the economic advice that entrepreneur Steve Jobs offered President Obama and adopt the successful economic policies that John F. Kennedy implemented to undo the economic crisis that he inherited. After all, Obama’s strategy of raising taxes (think ObamaCare) and Yellen’s strategy of buying bonds (QE) is not recovering the economy at a healthy rate by historical standards.