Ben Bernanke has a message for Wall Street and Main Street: Don’t worry, expect no big changes in Fed policy — unless the economy changes in a major way. Don’t hold your breath.
No question, the nation’s top banker has a tough job convincing investors, producers and lawmakers he’s doing the right thing for the economy. The problem is, the Fed has a long track record of making big mistakes, but often doesn’t know until years later.
And it might be making one now.
While some speak of the Fed’s “success,” holding interest rates at zero and buying $85 billion a month in Treasuries — the Fed now owns more than $3.5 trillion in U.S. debt, up from $900 billion just a few years ago — this hasn’t brought us a normal economic recovery.
Indeed, despite the incredible stimulus, inflation remains below the Fed’s 2% target. GDP growth is averaging an anemic 1.7% in the past year.
All told, the economy is just 3% bigger than at the end of 2007, when the recession began. By comparison, in a normal recovery GDP is usually up 16% or more this far into a recovery.
Unemployment of 7.6% isn’t close to satisfactory. And since last year all of the net U.S. jobs created have been part-time positions; it’s obvious we’re in an unprecedented employment crisis.