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April 9, 2014

Jonathan Tobin: Why Did Kerry Lie About Israeli Blame?

Samuel G. Freedman: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Jessica Ivins: A resolution 70 years later for a father's unsettling legacy of ashes from Dachau

Kim Giles: Asking for help is not weakness

Kathy Kristof and Barbara Hoch Marcus: 7 Great Growth Israeli Stocks

Matthew Mientka: How Beans, Peas, And Chickpeas Cleanse Bad Cholesterol and Lowers Risk of Heart Disease

Sabrina Bachai: 5 At-Home Treatments For Headaches

The Kosher Gourmet by Daniel Neman Have yourself a matzo ball: The secrets bubby never told you and recipes she could have never imagined

April 8, 2014

Lori Nawyn: At Your Wit's End and Back: Finding Peace

Susan B. Garland and Rachel L. Sheedy: Strategies Married Couples Can Use to Boost Benefits

David Muhlbaum: Smart Tax Deductions Non-Itemizers Can Claim

Jill Weisenberger, M.S., R.D.N., C.D.E : Before You Lose Your Mental Edge

Dana Dovey: Coffee Drinkers Rejoice! Your Cup Of Joe Can Prevent Death From Liver Disease

Chris Weller: Electric 'Thinking Cap' Puts Your Brain Power Into High Gear

The Kosher Gourmet by Marlene Parrish A gift of hazelnuts keeps giving --- for a variety of nutty recipes: Entree, side, soup, dessert

April 4, 2014

Rabbi David Gutterman: The Word for Nothing Means Everything

Charles Krauthammer: Kerry's folly, Chapter 3

Amy Peterson: A life of love: How to build lasting relationships with your children

John Ericson: Older Women: Save Your Heart, Prevent Stroke Don't Drink Diet

John Ericson: Why 50 million Americans will still have spring allergies after taking meds

Cameron Huddleston: Best and Worst Buys of April 2014

Stacy Rapacon: Great Mutual Funds for Young Investors

Sarah Boesveld: Teacher keeps promise to mail thousands of former students letters written by their past selves

The Kosher Gourmet by Sharon Thompson Anyone can make a salad, you say. But can they make a great salad? (SECRETS, TESTED TECHNIQUES + 4 RECIPES, INCLUDING DRESSINGS)

April 2, 2014

Paul Greenberg: Death and joy in the spring

Dan Barry: Should South Carolina Jews be forced to maintain this chimney built by Germans serving the Nazis?

Mayra Bitsko: Save me! An alien took over my child's personality

Frank Clayton: Get happy: 20 scientifically proven happiness activities

Susan Scutti: It's Genetic! Obesity and the 'Carb Breakdown' Gene

Lecia Bushak: Why Hand Sanitizer May Actually Harm Your Health

Stacy Rapacon: Great Funds You Can Own for $500 or Less

Cameron Huddleston: 7 Ways to Save on Home Decor

The Kosher Gourmet by Steve Petusevsky Exploring ingredients as edible-stuffed containers (TWO RECIPES + TIPS & TECHINQUES)

Jewish World Review Oct. 18, 2010 / 10 Mar-Cheshvan, 5771

What's left in the Fed's toolbox?

By Robert J. Samuelson




http://www.JewishWorldReview.com | It is widely, though not universally, assumed that the Federal Reserve will soon move to bolster the economy by trying to nudge down long-term interest rates on Treasury bonds, home mortgages and corporate bonds. Just how much rates would decline and how much production and employment would increase are uncertain. What's clearer is that the move would be something of an act of desperation, reflecting a poverty of good ideas to resuscitate the economy.

The Fed is suffering an identity crisis. Celebrated under Chairman Alan Greenspan as a guarantor of prosperity, it is now struggling to restore its exalted reputation. In the acute phases of the financial panic, in late 2008 and the first half of 2009, it devised ingenious ways to provide credit to parts of the financial markets (commercial paper, money market funds) that were being abandoned by private lenders. For almost two years, it held its short-term interest rate near zero. All this arguably averted a second Great Depression but obviously did not trigger a vigorous economic recovery.

Chairman Ben Bernanke makes periodic speeches arguing that the Fed still has ample policy tools to revive the economy and reduce the appalling unemployment, despite lowering its short-term interest rate to zero. The reality is otherwise; the Fed's remaining tools are arcane, weak, or both. Says a commentary by Bank of America economists:

"Think of the Fed as a group of soldiers in a foxhole. They have fired their bazooka and their rifle ammunition . . . and they are now using their pistols." What the Fed is expected to authorize, probably in early November, is a large purchase of U.S. Treasury bonds with the intent of driving down their interest rates and rates on other long-term debt securities. It has already done this once. In late 2008, the Fed approved massive bond purchases; these ultimately totaled $1.725 trillion of mortgage-backed securities, U.S. Treasury bonds and Fannie Mae and Freddie Mac bonds. Bernanke has said the program "made an important contribution" to the economic recovery.

But the measurable effects were small. Rates on 10-year government, corporate and mortgage bonds might have dropped by 0.6 percentage points, estimated a Fed study by economists Joseph Gagnon, Matthew Raskin, Julie Remache and Brian Sack. The decline this time might be less, because starting interest rates are already low (about 4.3 percent for a 30-year mortgage) and the purchases might be smaller. Guesses generally range from $500 billion to $1 trillion.

The economists at Bank of America think new purchases would have "only a modest impact on the economy" but are "better than doing nothing." A plausible program might cut the unemployment rate by 0.2 percentage points (say, from 9.6 percent to 9.4 percent), says Moody's Analytics. The stock market would be slightly stronger, leading people to spend more, and a depreciated dollar would aid exports. Indeed, because Bernanke and other Fed officials have signaled a new round of bond buying, financial markets may already reflect some of these effects. This makes it harder for the Fed not to vindicate these widespread expectations.

Still, there are dangers. When the Fed buys Treasury bonds, it pumps dollars into the economy. So far, this hasn't stimulated much borrowing by anxious households and cautious businesses. Outstanding consumer credit has been dropping since the summer of 2008. The Fed might be "pushing on a string," to quote a phrase dating to the 1930s. Banks have excess reserves of roughly $1 trillion. But if all the cheap money spurs much higher economic growth, many of these reserves will turn into loans and raise the specter of higher inflation -- "too much money chasing too few goods." The Fed would then have to withdraw or neutralize the added money through higher interest rates. Adding hundreds of billions more to banks' excess reserves won't make the job easier.

As important, there would be enormous pressure on the Fed not to raise rates while unemployment remains high. Economist Allan Meltzer of Carnegie Mellon University, author of a three-volume history of the Fed, fears that the Fed will -- as in the 1960s and 1970s -- wait too long. "Sooner or later, we'll have a big inflation," he says, "but not right away, because there's no demand now." Economists seem split into two camps. Some, such as Paul Krugman, the New York Times columnist, believe the economy is so weak that the government should do almost anything (bigger deficits, more cheap credit) that might help slightly; and others, such as Meltzer, fear that expedient measures now will lead to bigger problems later. Between them, there's an unstated common presumption that there are no instant cures for the economy's lethargy. The real Fed, it turns out, is much less powerful than the mythologized Fed.

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10/11/10: The Age of Austerity
09/20/10: The ritual of sound-bite economics
08/09/10: America's parent trap
08/02/10: Hope for our energy future
07/29/10: Why CEOs aren't hiring
06/07/10: Duped by success
05/31/10: Why Obama's poverty rate measure misleads
05/17/10: Wake up, America
03/22/10: The maestro's misconceptions
03/15/10: Obama's illusions of cost-control
01/14/10: In the aftermath of the Great Recession
12/29/09: Democracy's demolition derby
11/30/09: Bipartisan threats against the institution that saved America from depression
09/14/09: Give It to Us Straight
09/07/09: Bad Future for Jobs?
08/24/09: A Rail Boondoggle, Moving at High
08/10/09: Championing the Status Quo
08/03/09: We'll remain in denial, prisoners of wishful thinking, until the fateful reckoning arrives in the unimagined future
07/27/09: Obama's misleading medicine
07/13/09: Americans' self-indulgence hurts us
07/06/09: Economists out to lunch
06/29/09: Panics ‘R’ Us!
06/08/09: Flirting with deflation or inflation? Now the economy might be at risk of both
05/25/09: A ‘crisis’ America needs
05/18/09: Will somebody finally say that Obama is irresponsibly mortgaging our future?
05/04/09: The Bias Against Oil And Gas
04/27/09: Environmentalists maximize the dangers of global warming while pretending we can conquer it at virtually no cost
04/20/09: Our Depression Obsession
03/23/09: Geithner treads a line between financial paralysis and populist resentment
03/23/09: American Capitalism Besieged
01/06/09: The limits of pump priming
12/29/08: Humbled By Our Ignorance
07/31/08: The homeownership obsession
07/24/08: A Depression? Hardly
07/17/08: Why isn't globalization making the interconnected world more stable?



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