That’s what these guys in government are like, white noise, and the Fed is no different. I think they count on people wearing themselves out after having almost as much effect as waves of water crashing down on rocks.
I watched the Bernanke testimony before congress today, hoping to hear some clue that this God awful monetary experiment would be coming to an end. It was wasted hope. There was no mea culpa. No moving forward, no putting this entire nightmare in the rear view. But it gets worse than just that.
The vice-chairman of the committee, a Republican, was insisting that Bernanke take QE3 off the table. That is so wrong I can’t even describe how I feel about my own party being stuck on ‘the beatings will continue until morale improves’ economic policy. Whatever happened to Fed independence, anyway? It is like Obama going out and trying to cow the Supreme Court. The informal rule of not politicizing the Fed only applies to Democrats now?
QE hasn’t worked in the past because it wasn’t conditions-based, but even a set amount is better than nothing. Looking at the backdrop of the European crisis sending shockwaves across the globe, there needs to be QE until we either have some idea about how it is going to be resolved or economic conditions reflect a need to stop. We need to get interest rates to rise and we can’t just go out and raise them; it needs to be a secondary effect.
Now might be a good time for the Fed to decide on NGDP level targeting. It really is the only way out of this monetary quagmire. Playing with interest rates with Operation Twist is just silliness when credit markets are broken. QE until the cows come home is an option, but it now has so many stigmas attached to it that leaving it on the table is nearly equal to torturing babies in the public mind. It doesn’t matter what the truth about the situation is, people haven’t been told the truth. And so we should either go for NGDPLT or we get to go for another 18 months barely keeping our heads above water, at best, until we can finally see the backside of Bernanke. When he is finally gone, I think I will throw a going away party and not invite him.