I try to be optimistic. In fact, I quite often end up disappointing myself. In a recent post I brought up that Romney has been talking about the need for rising incomes. I was hopeful that was code for more NGDP and just as I’m ready to jump aboard the Romney train, I see this article in Bloomberg, titled:
Third Fed Stimulus Won’t Be Better Than QE2, Romney Says.
Presidential candidate Mitt Romney said the Federal Reserve’s attempts at stimulating the U.S. economy “did not have the desired effect” and a new round of quantitative easing by the central bank wouldn’t fare better.
The second round of quantitative easing, a series of bond purchases referred to as QE2, “was not extraordinarily harmful, but it does put in question the future value of the dollar and it will obviously encourage some inflation,” Romney said in an interview that aired today on CBS’s “Face the Nation” program. “A QE3 would do the same thing.”
Is there no one in the political class who understands that this recession is entirely self-inflicted and is going to stop this tight money insanity? The choice between austerity and expansive government is a false choice. There is a third way. The third way, fixing the Fed, is the only way because there is absolutely no way government can fill up the huge hole in AD, even if it raised no taxes, cut everything to the bone, never spent another dime, or in the alternative, spent like there is no tomorrow. Neither of those can fix the problem because the problem is too big.
I am not saying that government doesn’t have a financial problem. It does. But that isn’t the majority of the recession, and just fixing that isn’t going to help much as long as the Fed keeps allowing disinflationary gyrations to go floating through the economy. We cannot have stability in that environment because that environment isn’t stable. The less stability we have and the more jitters we have in the markets, the less long term investments we’ll have. Romney appears to have better leadership skills, but it will take more than a cult of personality when it comes to money to get this ship turned around.
I hate to say this, but unless Romney is intentionally lying, we’re going to be stuck with this monetary reality. I hope I’m wrong, because if I’m not – we’re totally screwed.