Freeman

IN BRIEF

Fed's Coffers Can't Provide Certainty

SEPTEMBER 17, 2012 by CHUCK GRIMMETT

“The central banks in the world’s two largest economies, Europe and the United States, took extraordinary actions this past week. They each promised an unlimited amount of money to help restore the economy.

By opening their money spigots indefinitely – essentially printing more dollars and euros – the banks are attacking one big problem: uncertainty. Too many investors and consumers still see too many unknowns to be confident about the future. …

The Federal Reserve chief, Ben Bernanke, happens to be one of the leading scholars on economic uncertainty. In a 1983 paper, he showed how small-business owners will delay hiring and spending if government policies on taxes and regulation are too fickle over time.

Now as Fed chief he’s promising to spend $40 billion a month to buy up bonds in order to push easy money into lending markets, especially housing. This latest round of “quantitative easing” (or “QE3”) includes another extraordinary move for the Fed. Its buying spree will end only when the job market is healthy, Mr. Bernanke says. The European Central Bank (ECB), meanwhile, promises unlimited bond-buying to stem a lack of confidence in the eurozone.” (Christian Science Monitor)

Opening up their coffers indefinitely will only lead to trouble, not certainty.

FEE Timely Classics

The Return of the Keynesians by Christopher Lingle

Does Government Spending Bring Prosperity? by Percy L. Greaves Jr.

Chuck Grimmett August 2013

ABOUT

CHUCK GRIMMETT

Chuck Grimmett is a project manager at eResources. Previously, he was FEE's director of web media. Get in touch with him on Twitter: @cagrimmett.

comments powered by Disqus

EMAIL UPDATES

* indicates required

CURRENT ISSUE

December 2014

Unfortunately, educating people about phenomena that are counterintuitive, not-so-easy to remember, and suggest our individual lack of human control (for starters) can seem like an uphill battle in the war of ideas. So we sally forth into a kind of wilderness, an economic fairyland. We are myth busters in a world where people crave myths more than reality. Why do they so readily embrace untruth? Primarily because the immediate costs of doing so are so low and the psychic benefits are so high.
Download Free PDF

PAST ISSUES

SUBSCRIBE

RENEW YOUR SUBSCRIPTION

Essential Works from FEE

Economics in One Lesson (full text)

By HENRY HAZLITT

The full text of Hazlitt's famed primer on economic principles: read this first!


By FREDERIC BASTIAT

Frederic Bastiat's timeless defense of liberty for all. Once read and understood, nothing ever looks the same.


By F. A. HAYEK

There can be little doubt that man owes some of his greatest suc­cesses in the past to the fact that he has not been able to control so­cial life.


By JEFFREY A. TUCKER

Leonard Read took the lessons of entrepreneurship with him when he started his ideological venture.


By LEONARD E. READ

No one knows how to make a pencil: Leonard Read's classic (Audio, HTML, and PDF)