The Economist Forgets How Many Unemployed Have Starved to Death Thanks to Zimbabwe Ben
Soon enough, we're going to have to start a Zimbabwe Ben Body Count to accompany Greenspan's as working class shlubs turn into Somalians with bloated bellies (in NASCAR hats, of course).
What The Economist forgets while they are busy jerking the Fed off for an awesome QE 2 is that as this thing drags on, the unemployed tend to give up. Whether they starve or die or move to Canada is for others to debate but for us what's important is that eventually many say "fuck it" (looking for work for two or three years might do that to a person) and drop off the map. For the government, this means the opportunity to scratch off more and more unemployed and spin better unemployment numbers as proof that these idiots know what they are doing.
And The Economist is more than happy to eat it all up and give Bernanke a long hard hand job while doing so. The author of this piece, keeping with the seediness of the whole thing, goes by R.A. - presumably so embarrassed by his or her behavior that he or she chooses to remain somewhat anonymous. Who can blame 'em? I'm sure your mother is proud, R.A.
The Economist's Free Exchange:
The Fed's forecast range for the unemployment rate in 2012 is 7.7% to 8.2%, and the Congressional Budget Office forecasts an unemployment rate of 8.4% (this forecast dates to after the announcement of QE2, but isn't meaningfully different from its forecasts from the summer of 2010). This would suggest that with QE2 in place, American unemployment is likely to be between 6% and 7% in 2012. That's not full employment, but it's pretty close. You can argue that more needs to be done (indeed, I think the Fed itself could do more). But it is worth noting that the Fed has put the American economy on a substantially better recovery path than it faced before (Scott Sumner would say it has returned the economy to the path off which it previously led it).
A big risk is that the Fed will back away from its policy too quickly, thinking all is going well and worrying premptively about inflation.
Ha!! Is that the big risk? Sure about that? The big risk isn't that the Fed has all but forgotten about this "exit strategy" they never had in the first place and will not even go back to trying to duct tape one together until it's too late? Or that we're exporting inflation around the world while burning up our own ever-increasing-in-price food for gas because the government says we have to? Or that The Economist is still being published?
What more could the Fed possibly do? Reciprocate the hand job, maybe? At least the 23% of Americans that are actually unemployed (not this made up 9% that the government reports) would have a smile on their faces in the breadline.