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The Federal Reserve Acted Decivisely; Now Where's Congress?

The Federal Reserve acted decivisely to reduce unemployment over the next few years with QE3. Now it's time for Congress to step up to the plate and pass President Obama's jobs bill.

 

I support the aggressive steps taken by the Federal Reserve to attack unemployment.

Traditionally, the Fed has been the nation’s guardian against inflation. However, with the inflation rate below 2% and unemployment hovering at 8%, the Federal Reserve has structured a program designed to stimulate economic growth while allowing for only a slight rise in inflation.

Chairman Ben Bernanke and 11 out of 12 policymakers voted to implement QE3 - Quantitative Easing 3. This involves the purchase of $23 billion in mortgage bonds by the end of this month, escalating to $40 billion next month - the number changes in subsequent months as needed. Contrary to QE1 and QE2, which were limited in time and sum, Bernanke is adamant that QE3 will continue until the unemployment crisis is clearly over.

Purchasing mortgage bonds is designed to lower mortgage rates, drive an increase in housing starts, and create high-paying jobs in industries such as construction. This would have a ripple effect on the rest of the economy.

Fed officials believe that unemployment will decrease much more rapidly in the coming year because of their decisive action. Economists outside the government do not expect sudden, dramatic growth, but they do support the proposition that QE3 will have a positive impact over time.

Wall Street applauded the Fed’s action as evidenced by the 1.6% jump in the Dow Jones Industrial Average (206.51 points). Democrats also applauded the move. No surprise - Republicans, including presidential candidate Mitt Romney, did not support the Fed’s action despite their pro big-business agenda.  

While QE3 is a positive step, it is not enough by itself. It is time for Congress to do its part and pass President Obama’s jobs plan. 

The president’s plan will create good-paying jobs in infrastructure, research, and education. When an organization as conservative as the Federal Reserve sees the need for stimulus, the House and Senate Republicans must break with their obstructionist policies. Congress must put the American people first – they must stop playing “Let’s see what happens at the election,” Russian roulette style.

In particular, Congressman Rodney Frelinghuysen (R-11) has to place the needs of our district and state above those of his party.

New Jersey has one of the highest unemployment rates in this nation (9.8% as of July 2012), ranking very close to the top of 51 states surveyed (including the District of Columbia).

That is not acceptable.  I urge Mr. Frelinghuysen to put partisan politics aside and to vote to do what's right for the citizens of our state and our country.

This post is contributed by a community member. The views expressed in this blog are those of the author and do not necessarily reflect those of Patch Media Corporation. Everyone is welcome to submit a post to Patch. If you'd like to post a blog, go here to get started.

Adam Kraemer September 18, 2012 at 10:21 AM
John: If you want more employment how about reducing the size and scope of government so the free enterprize system can generate economic growth and jobs. At this point governmen is in the way of the job makers. We have has about three or four years of goverment masivley "priming the pump" by spending money it does not have and nothing to show for it but more debt.
Jon Arlauskas September 18, 2012 at 04:52 PM
Robert, you got me completly wrong, its the endless spending promoted by both parties of this country that has lead us too here. i agree with you on many points. In my opinion though the federal reserve is one of the most dangerous and destructive forces we have in our country today.
Jake Smith September 21, 2012 at 04:53 PM
These Democrats must live in an alternate universe. They keep pushing the same old tired, failed policies and keep wishing and hoping (definitely not praying! ;) ) for a different outcome. Hey, isn't that the definition of insanity? they bore me with their drivel. They want to take money out of our pockets, to put into their pockets, to redistribute where they see fit towards initiatives that DON'T WORK!!! But, don't let us bore you with those pesky things called facts. Leave my money alone and let me handle my life. John needs to go live in a nice socialist country and cozy up with his anti-freedom, anti-liberty, anti-free markets soulmates. Dems are so anti everything this country stands for it's absolutely sickening - especially when they have prospered from it. HYPOCRITES!
tryintosurvive September 21, 2012 at 06:48 PM
John Arvanites uses the Patch as a free way to get press. Usually this is just to espouse his partisan positions and say those other guys are really bad.
Al Czervik September 21, 2012 at 07:56 PM
The Federal Reserve has added more than $2 trillion to the base money supply since 2008 – an unprecedented number that is intended to cover their deep losses and spur lending & investment. Instead, as banks continue their enormous deleveraging, almost all of their new money remains at the Fed in the form of excess reserves. Corporations are holding the largest amounts of cash, relative to assets and net worth, ever recorded. And yet, despite what pundits claim about strong balance sheets, firms’ debt levels, relative to assets and net worth, also remain near record-high levels. The velocity of money (the frequency at which money is spent, or GDP relative to base money) continues to plunge to historic lows this offsets any impact of monetary policy. Federal Reserve manipulation of interest rates, however, does not influence time preference, even though it signals such a change. The resulting inconsistency creates distortions: as with any price control, capital receives an incentive to flow to investment that is inconsistent with actual supply and demand. The Fed, in the long run, simply cannot direct entrepreneurs to lend, borrow, and invest; investment capital will inevitably shrug when faced with oppressive manipulation of free markets. When that happens, we see the true result of loose monetary policy: not the creation of more economic activity, but the destruction of the natural mechanism of economic coordination and adjustment, robbing the system of its resilience

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