Dirty, Easy Money

By Ferguson, Niall | Newsweek, September 10, 2012 | Go to article overview
Save to active project

Dirty, Easy Money


Ferguson, Niall, Newsweek


Byline: Niall Ferguson

While the GOP met in Tampa, titans of finance flew to Wyoming.

Which mattered more to you last week: the Republican National Convention in Tampa, or the Federal Reserve's annual economic-policy symposium in Jackson Hole, Wyo.?

If you're just managing to get by, then it was the former. In his barnstorming speech, Paul Ryan nailed it again: "The issue is not the economy that Barack Obama inherited ... but this economy that we are living. College graduates should not have to live out their 20s in their childhood bedrooms, staring up at fading Obama posters and wondering when they can move out and get going with life."

Direct hit.

But if you're one of the fortunate few who manages anything above $100 million in financial assets, it was Jackson Hole you were watching, for any sign of fresh monetary stimulus from Fed Chairman Ben Bernanke.

Everyone knows about the fiscal cliff of spending cuts and tax hikes that the United States is going to hit at the end of this year, barring some miraculous bipartisan agreement. But could there also be a monetary cliff?

The Fed has thrown a lot at our ailing economy. It has slashed interest rates to near zero--and promised to keep them there until 2014. In the wake of the Lehman Brothers bankruptcy, it bought all kinds of toxic assets to avert a chain reaction of bank failures. "Quantitative Easing 1" was followed by QE2 (purchases of Treasury securities), resulting in a cumulative threefold increase in the monetary base. Bernanke's most recent gambit was "Operation Twist" (exchanging short-term for long-term Treasuries).

If the Fed's mandate were to juice the stock market, Ben Bernanke would get an A. Since the last Jackson Hole meeting a year ago, the S&P 500 is up nearly 22 percent. But since the Fed's mandate is to achieve price stability and full employment, the grade is B- at best. True, inflation is--officially at least--around 2 percent. But unemployment is stuck at 8.3 percent. If I'd bought assets worth nearly $2 trillion, I'd be a tad disappointed by that.

The Fed is in a hole--a Jackson Hole. Some members of the Fed's Open Market Committee want to keep digging by providing the "additional monetary accommodation" that traders have been craving for months. They point to the latest Fed Beige Book, which reveals an economy that is still limping.

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
Loading One moment ...
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited article

Dirty, Easy Money
Settings

Settings

Typeface
Text size Smaller Larger
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

While we understand printed pages are helpful to our users, this limitation is necessary to help protect our publishers' copyrighted material and prevent its unlawful distribution. We are sorry for any inconvenience.
Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.

Are you sure you want to delete this highlight?