Jacob Bøtter (CC-BY)
The whole thing is nuts. The economy is a shambles, saved from a free fall only by the Federal Reserve's unprecedented promise of free money for banks for at least two years. That's how long a seven-member majority of the Fed's Open Market Committee expects it to take for significant relief to take hold for the 25 million Americans who can't find full-time employment.
The 10-member committee's three dissenters in Tuesday's decision, all unelected Fed regional board presidents, are free-market ideologues who don't believe the government has a role to play in reversing the nation's economic disaster. One is a former Wall Street investment banker and vice chairman of Henry Kissinger's consulting firm. The other two are University of Chicago school of economics disciples long committed to free-market purism and blind faith in the mathematical models that had much to do with radical deregulation and the subsequent collapse of the financial markets.
That view led Minneapolis Fed President Narayana Kocherlakota, before he assumed his Fed position, to sign a petition that the libertarian Cato Institute placed in various newspapers opposing President Barack Obama's economic stimulus plan.
The dissent of the three members is thought to have prevented the Fed from pursuing more vigorous action such as the anticipated "QE3" purchase of additional securities. As New York Times columnist Floyd Norris speculated, "perhaps the dissenters really want to essentially say something like "We've done all we can, and if the economy is still lousy, that is for someone else to deal with.' "
Meanwhile, Obama has been reduced to an impotent bystander promising vigorous budget cuts in response to Standard & Poor's adverse credit rating. The president's pathetic performance on Monday, as the market crashed, was the low point of his career. Nor did it help that the rush of investors to Treasury bonds validated his bold claim that the United States of America deserves a perfect credit rating. On that point he is right, but Obama's failure to challenge the idiocy demanded by S&P, along with the Republicans--that government spending be dramatically cut in the face of an economic crisis--cast his remarks as terminally tepid.