Despite the wonkiness of the Fed's latest commitments -- these changes will put a real floor for growth and expansion underneath the American Economy. For years to come.
Ben Bernanke: The economy’s tough, older friend
by Ezra Klein, washingtonpost -- Sep 13, 2012
The Federal Reserve’s announcement Thursday is a big deal.
It’s a big deal because of what they’re doing. They’re buying $85 billion in assets every month through the end of the year, and then they’re potentially going to keep doing it in 2013. They’re promising to keep interest rates low through the recovery, and then keep them low after the recovery strengthens.
But it’s a bigger deal because of what they’re saying. Thursday, the Federal Reserve said, finally, that they’re not content with 8 percent unemployment and a sluggish recovery, and they’re willing to actually do something about it. If you’re an investor or a business owner trying to decide what the market is going to look like next year, you just got a lot more optimistic.
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Looks like Mitt Romney is
not the only one with a plan -- to "grow the Economy."
Jim Cramer is bullish on the Fed's latest move (the wider stock market too) to help actual Americans and not just the Markets ...
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"Bernanke can impact supply -- the supply of homes that is -- and he can do that be ensuring that mortgage rates stay low, hence the mortgage bond buying program," Cramer said. "And he can make bankers feel more confident making home loans, which, believe me, is something they’re still skittish about doing right now."
What gives Bernanke "the right" to do this -- to take sustained action to help average people?
Well in a word -- his Job Description does:
Full Employment Act -- Requires the Chairman of the Federal Reserve to connect the monetary policy with the Presidential economic policy.
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The Full Employment and Balanced Growth Act (known informally as the Humphrey–Hawkins Full Employment Act), is an act of legislation by the United States government.
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The Act set specific numerical goals for the President to attain. By 1983, unemployment rates should be not more than 3% for persons aged 20 or over and not more than 4% for persons aged 16 or over, and inflation rates should not be over 4%. By 1988, inflation rates should be 0%. The Act allows Congress to revise these goals over time. [...]
But since the Republican-blocked Congress has refused to help the people --
the Federal Reserve has taken up this very worth cause ...
to spur employment. Well into a stronger recovery ...
The significant of this game-changing news was not lost on Time magazine either ... since Mortgage-backed-securities are the core of our economic problems, thanks to lack of oversight last decade -- Bernanke's buyback program for these toxic MBS now, is designed to stop the bleeding. And promote the home-equity healing ...
Ben Bernanke’s Heavy Artillery: Will Open-Ended Bond Buying Drive Down Unemployment?
by Christopher Matthews, Time - Business -- Sep 14, 2012
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And while Congress and the President have been locked in an ideological struggle over the role of government in the economy, unable to come to terms on any solutions to the crisis of joblessness, America’s central bank has been in a position to act unilaterally -- above the political fray that is paralyzing Washington’s legislative process. That’s why many critics of the bank and its chairman, Ben Bernanke, have been calling vociferously for it to take more action to goose the economy and bring down unemployment.
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Yesterday, Ben Bernanke and the Federal Open Market Committee came down on the side of those calling for more action, announcing a bold, open-ended mortgage-backed-security purchasing program, which will pump $40 billion a month into the economy indefinitely until the unemployment market improves significantly. Said Bernanke in yesterday’s press conference:
“If we do not see substantial improvement in the outlook for the labor market, we will continue the MBS purchase program, undertake additional asset purchases, and employ our policy tools as appropriate until we do. We will be looking for the sort of broad-based growth in jobs and economic activity that generally signal sustained improvement in labor market conditions and declining unemployment.”
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Open-ended purchases of mortgages will have the effect of lowering interest rates, helping more people qualify for mortgages or refinance. But more importantly it will -- in theory -- have the effect of creating an expectation of generally higher asset prices in the future, which will motivate people to get off their duffs and spend money now. If companies and individuals are indeed convinced that prices will rise in the future, that would encourage them to spend, hire, and jump-start the economy out of its chronic underperformance.
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The key is
the Open-ended commitment -- even Mitt Romney couldn't deliver that. Heck,
Mitt can't commit to one stance for more than a week, in most cases.
QE3 is on! Fed to buy $85b through December, and then keep going
by Dylan Matthews, washingtonpost -- Sep 13, 2012
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The key here, which differentiates this from QEI and QEII, is that the commitment is open-ended -- the Fed has committed to continuing the buys if the economic situation is not significantly improved at the end of the year. Jeffrey Lacker, president of the Richmond regional bank and a noted inflation hawk, was the only vote against.
In addition to the QE announcement, the bank stated it will maintain its interest rate range of 0 to 1/4 of a percent until mid-2015, a later date than their previous commitment to keep rates low through 2014. Also new is the bank’s commitment to keep policy easy even after the recovery has gotten stronger: “The Committee expects that a highly accommodative stance of monetary policy will remain appropriate for a considerable time after the economic recovery strengthens.”
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Look for happy days to be here again.
If we only stay the current course.
We're still cleaning up their toxic mess -- only this time we got some serious mops tackling the problem.
Mortgage-clean-up Mops -- not hindered by the stonewalling agendas of Congressional chair-warmers, who would rather pad their backsides, and actually do their jobs -- that the American people elected them to do.