Tags: WSJ | Fed | easing | good

WSJ: Fed Easing Isn’t Doing Us Any Good

Friday, 01 Feb 2013 10:12 AM

By Dan Weil

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Wall Street Journal editors are none too impressed with the Federal Reserve’s decision Wednesday to stick with its massive easing program.

The Fed is buying $85 billion of Treasurys and mortgage-backed securities a month and plans to keep short-term interest rates near zero until unemployment drops to 6.5 percent, from 7.8 percent in December.

“The Fed has led a parade of easing around the world, as other central bankers follow to prevent their currencies from rising too much,” according to a Journal editorial. “Yet the economic paradox of our time is slow growth and lousy job creation despite these monetary exertions.”

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

The U.S. economy contracted 0.1 percent in the fourth quarter, and the consensus is that growth will total about 2 percent in 2013.

“This continues to be the 2 percent recovery, the slowest in the modern era,” the editorial states.

It cites Stanford University economist John Taylor, who wrote in the paper Tuesday that current Fed policy “creates incentives for otherwise risk-averse investors to take on questionable investments as they search for higher yields.”

Once the Fed begins to raise rates, trouble will ensue, says Harvard economist Martin Feldstein.

“If we take long-term bond rates to anything like a normal number, that means higher bond interest rates, higher mortgage interest rates, pressure on the stock market and pressure on house prices,” he tells CNBC.

Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did

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