Larry Kudlow expects no better outcome from a third round of Federal Reserve “quantitative easing” than from QE1 or QE2. He explains in his latest column.
The trouble with all this is that it didn’t work the last time with QE2, and it will have no permanent effect on the slumping economy. Targeting bond yields and printing more money simply distorts asset prices throughout the financial markets. We’ve seen this movie before. And it didn’t play well. The Fed’s shock-and-awe risks another round of dollar depreciation. It’s part of the message of skyrocketing gold prices right now.
Unleashing dormant animal spirits in this economy can only come from the fiscal side, with low-tax and regulatory reforms to provide new economic-growth incentives and lower the cost of doing business. A pro-growth package from Washington is what we really need. It should be part of the next round of budget cuts, included in the work of the super committee during phase two of the debt deal.
Without those new incentives for growth, the Fed can print all the new money in the world and the federal government can spend itself into oblivion, and none of it will resurrect the economy.
