For the first time in quite awhile the FED has said and did something that at least made a modicum amount of sense. The Federal Reserve Chairman spoke on the 28th and told the country the FED was standing pat for now. No more stimulus dollars being dropped from heaven in the form of a Q.E.3. This mightily disappointed some wall street folks who were looking forward to a payday courtesy of the U.S. taxpayer but the rest of us should be sighing a sigh of relief. The now infamous Q.E. 1 and 2 only succeeded in putting an uptick in the markets long enough for Wall Street to rake in some more cash while at the same time putting the rest of us on the hook for the tab. (Be rest assured we will also pay for those FED follies in other ways as well)
The real kicker was held for those that did not turn the channel after the first few lines of his speech. He basically said the FED can’t fix stupid. Well not exactly but close. He let congress and the president know they are the ones screwing things up and if they do not get on the ball we are all in a heap of trouble, he almost sounded like he was speaking at a Tea Party rally. He told those up on the hill that the fiscal problems including the unfunded mandates of social security and especially medicaid have to be fixed and fixed soon. He also chided them for their budgeting skills or more appropriately their lack of any logical budgeting process.
Now on that last issue he could of mentioned the fact that the Democrats in congress have not proposed a budget in years and that the only budget the president has proposed got laughed out of congress by members of both parties (actually, it just got a 100% no vote but that is basically the same thing). Of course it is easier to just wait for your opponent to suggest something so you can just stand back and ridicule it than put out something of your own. That may seem like good politics but it is lousy governing.
Another thing the Chairman left out is that the congress and the President have created an economic environment that is killing economic innovation. He skipped the fact that the main complaint from the business community is that it is in a totally unpredictable environment. That in essence they are running scared and it is the busy bodies in congress and agencies under the control of President Obama that has them that way. Of course scared businessmen (and women) do not invest or hire, they stay pat. Some other things the chairmen could of mentioned:
- The new Dodd Frank regulations that added tons of new restrictions and regulations as well as put a whole new bureaucracy in place while not doing anything to address the fundamental reasons we got into this mess in the first place. It is so burdensome that a whole new pariah industry is springing up to advise business on its compliance as well as a whole new set of governmental bureaucrats whose sole purpose is to meddle in private businesses. It also tries to regulate derivative trading (agreements to buy and sell things in the future at a certain price) in such a way that it is bound to drive the business off shore.
- ObamaCare also known as the health care reform bill has already started businesses to reassess who they cover and how. Many businesses admit they still do not know how this legislation will affect them. One thing is certain the cost is going to be 100s of billions of dollars being taken from businesses both directly and in increased compliance cost and lead to hundreds of thousands of lost jobs. There will be also be unseen cost in businesses that do not expand or even cease to exist because of the new law. Its a law that increases government bureaucracy as well as puts government in between doctors and their patients and even accomplish what it was meant to, namely make sure everyone has insurance.
- The EPA according to the WSJ is declaring war on jobs. The article puts the new mercury regulations that threaten to shut down coal plants and dramatically raise the price of electricity. Other regulations are apparently in the works including new regulations on oil and gas wells. Other regulations include new ozone rules and fuel economy. It appears the EPA is getting ready to do a full court press on America’s businesses
- The National Labor Relations Board (NLRB) that really has no good reason to exist is trying to stop a completely new Boeing factory from opening in S. Carolina. Apparently because they chose to open it in S. Carolina, a right to work state. The NLRB apparently has more up its sleeve too as it decided all businesses need to remind workers they have the right to unionize.
- Other agencies are also feeling their oats as some 218 planned rule changes are about to take effect. Then there are reinterpretations of old rules which seems at the heart of the recent raids on the famous Gibson guitar factory.
Of course the chairman declined to mention the Federal Reserve’s part in the mess. I am sure it was just an oversight that he will clear up as soon as hell freezes over (or Al Gore admits his book was filled with deliberate errors, whichever comes first). Things like the huge amounts of cash banks and business have setting on the sidelines that will make the dollar drop like a rock as soon as it starts to move into the economy, thanks in no small part to the aforementioned Q.E. 1 and 2. Then there is the nearly zero interest rate that is undermining the dollar and investment as well (not to mention the role artificially low interest rates played in the mortgage disaster).
The truth is the fix to this economy does not lie in monetary policy (although its undoing might). There is no Fed lever it can pull that will magically make things all right and nor will the government spending more money it does not have change the situation. To fix this it will take a fundamental change in the attitudes and ideology of the folks in D.C. (which the chairman did mention) as well as a reigning in of the bureaucracies. The Federal government must shrink if we are to survive and to get through this we will all have to pay a price in one way or another. Unfortunately we will probably have to wait at least until 2012 to start on the road to recovery since the present administration has shown it is unwilling or incapable of doing the changes necessary
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