Today’s Wall Street Journal has an excellent article by David Malpass entitled “How the Fed is Holding Back Recovery.” Unfortunately, the Journal has made this a subscribers only piece, but if you’re not a subscriber, find a copy and read this illuminating piece.
Stumping around the country, Obama keeps resorting to his infantile “car stuck in a ditch” explanation, expecting that clueless people will cheer when he says that to get out, we must use the D (drive=Democrats) rather than the R (reverse=Republicans). Malpass offers a serious analysis focusing on the policies the Fed and the administration have adopted, which are impeding economic growth. Here’s part of what Malpass says:
As the government controls more industries and allocates more of the nation’s capital, small businesses lower their hiring plans, as they did last month, on the expectation that the federal government will tax them more to pay for Washington’s largess.”
What about Bernanke’s low interest rate policy? “Meanwhile, there’s been a powerful rechanneling of credit away from small businesses. Corporate and government jobs are faring better than small business jobs, another major structural change that Fed purchases (of Treasury debt) will exacerbate by channeling cheap credit to big entities.”
This is a replay of the 1030s. Bad government policy caused economic distortions and sent the economy into a tailspin and then politicians responded with yet more intervention to prolong and deepen the trouble.
