After reviewing the weak jobs report from the Bureau of Labor Statistics (BLS) that was released last Friday, the president of the Federal Reserve Bank of Boston, Eric Rosengren, decided it was time to call for more money to be added to the economy. The jobs report showed a gain that slightly exceeded economists’ consensus, but because of people quitting the work force because they couldn’t find jobs, the unemployment rate went up. And a separate report, not heralded by the media, showed households reported losing more than the BLS’s gains.
What to do? Add more money to the economy. And keep on adding more money until the moribund economy finally awakens. Here’s Rosengren’s prescription:
You [add money] until it’s clear that you’re no longer treading water. You continue to do it until you have documented evidence that you’re getting growth in income and the unemployment rate consistent with your economic goals.
The Fed has already added an astounding $2.3 trillion of new — freshly created out of nothing — money since the start of the Great Recession in 2007, with little to show for it. And so “doctor” Rosengren is calling for more of what made the patient sick in the first place: cheaper money to give false signals to consumers and investors that it’s ok to starting buying and investing again.
What’s surprising is that Rosengren isn’t alone. Reuters just polled 17 “primary dealers” — the large financial institutions that do business with the Fed — and asked them about the chances that the Fed will add new money. Thirteen of them said they expect the Fed to do precisely that no later than the next meeting of the Fed’s Open Market Committee scheduled for September 13th. And the rest of them expect the Fed to add more money in the near future, probably by the end of the year.
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Photo: President and CEO Federal Reserve Bank of Boston Eric Rosengren addresses the Massachusetts' Chapter of the National Association of Industrial and Office Properties in Boston, Oct. 15, 2008: AP Images