Wall Street Journal editors are singularly unimpressed with the Federal Reserve’s decision Wednesday to extend and increase its five-year easing program.
“The overarching illusion is that ever-easier monetary policy can return the U.S. economy to a durable expansion and broad-based prosperity,” they write.
“The bill for unbridled government spending stimulus is already coming due. Sooner or later the bill for open-ended monetary stimulus will arrive too.”
Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did
The Fed’s continuous easing points to a fundamental contradiction: the monetary accommodation hasn’t brought about an economic recovery, yet the central bank wants to keep applying the stimulus, the editorial says.
The economy averaged 2 percent growth in the second and third quarters.
The Fed is setting the government up for big trouble when interest rates finally rise, because that will spark a surge in its borrowing costs, the editors say.
“If Mr. Bernanke really wants to drive the president and Congress to reduce future spending, he shouldn't keep bailing them out with easier money.”
To be sure, some economists have a much more positive take on the Fed’s new easing steps than The Journal’s editors.
The strategy is “particularly likely to help stimulate the economy” and “reduce some of the considerable uncertainty about Fed policy that has resulted from the series of unprecedented actions taken over the past few years,” Michael Woodford, a Columbia University economist, tells The Washington Post.
Editor's Note: Economist Unapologetically Calls Out Bernanke, Obama for Mishandling Economy. See What They Did
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