Federal Reserve

The Federal Reserve Can't "Fix" Unemployment (or Income Inequality)


Why don't they just roll their cigars in a Franklin?
Credit: CityGypsy11 / Foter.com

Last week the Federal Reserve Board's Sarah Bloom Raskin addressed the National Community Reinvestment Coalition about employment options for moderate and low income working Americans. Her talk was a reflection on the Federal Reserve's decision to lower short-term interest rates, and the effect of the stimulus on the economy and unemployment:

The Federal Reserve's primary monetary policy tool is its ability to influence the level of interest rates. Federal Reserve policymakers pushed short-term interest rates down nearly to zero as the financial crisis spread and the recession worsened in 2007 and 2008. By late 2008, it was clear that still more policy stimulus was necessary to turn the recession around. The Federal Reserve could not push short-term interest rates down further, but it could–and did–use the unconventional policy tools to bring longer-term interest rates such as mortgage rates down further.

And yet, concedes Raskin, "while the Federal Reserve's monetary policy tools can be effective in promoting stronger economic recovery and job gains, they have little effect on the types of jobs that are created, particularly over the longer term." Speaking of types of jobs, Mark Spitznagel, a hedge fund founder and contributor to The Wall Street Journal, argued last year that the Fed's role in the recovery was to make the rich richer:

The Fed doesn't expand the money supply by uniformly dropping cash from helicopters over the hapless masses. Rather, it directs capital transfers to the largest banks….

The Fed is transferring immense wealth from the middle class to the most affluent, from the least privileged to the most privileged. This coercive redistribution has been a far more egregious source of disparity than the president's presumption of tax unfairness (if there is anything unfair about approximately half of a population paying zero income taxes) or deregulation.

While the Fed can alter short-term interest rates, print money, and go on an indefinite bond-buying spree, all that does is increase stock prices for the already wealthy. Such actions leave moderate and low incomes unchanged while decreasing the purchasing power of their income.

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  1. I don’t know who Solimon is, but anyone who uses alt-text in their first Reason post which I see is OK by me.

  2. But if we cut spending we will get streets flooded with cocaine, prison riots.

    Spending cuts undermine the ability to “catch the bad guys, whether it’s white-collar crime, like mortgage fraud, or street crime, or despicable things like trafficking women and children,” Senate Appropriations Committee Chairwoman Barbara Mikulski said in a recent floor speech.

    The Maryland Democrat noted that the spending cuts hurt local law enforcement officials who rely on federal grants to help in staffing and equipment purchases. “It’s not the biggest thing in the federal budget but it’s the biggest thing to cops,” she said. “Why? Because it buys bullet-proof vests.”

    The whole thing leaves Democrats looking a little like they’re rooting for bad news? though they insist that they’re only saying what is likely to happen if the money isn’t replenished.


    The last paragraph is from the “reporter”. But remember kids politico is totally a news outlet and not a boot licking propaganda rag for the Left.

  3. The Federal Reserve Can’t “Fix” Unemployment (or Income Inequality)

    Sure they can, just not in the direction that progressives think.

    1. You give progressives too much credit. Many are happy to impoverish the rich in order to wipe out inequality.

  4. The Federal Reserve Can’t “Fix” Unemployment (or Income Inequality)
    This is news?

  5. Funny enough, rolling their cigars in benjamins would go way further to fixing unemployment than pretty much anything they’ve done to date.

  6. Future generations are going to wonder what kind of slack-jawed bumpkins we were for believing that a central bank that merely printed money and gave it the financial class was good for anyone but the financial class.

  7. “The Federal Reserve Can’t “Fix” Unemployment (or Income Inequality)”

    No, but they can wipe out our savings and destroy our economy by trying to!

  8. “And yet, concedes Raskin, “while the Federal Reserve’s monetary policy tools can be effective in promoting stronger economic recovery and job gains”

    It can huh?

    Let’s see some actual proof of that, lady.

  9. All should watch this video: All Wars Are Bankers Wars

    America Wake Up Now!!!

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