Repeating the same activity over and over again and expecting different results is insanity...

Fed Policy Raising – Rather than Reducing – Unemployment

Washington’s Blog

The Federal Reserve announced that it will keep on engaging in quantitative easing in the amount of $85 billion dollars per month (or more) until unemployment improves.

That is like a medieval doctor bleeding a patient with leeches until his iron deficiency goes away.

Ken Griffin – head of Citadel Capital – noted this week:

As we’ve all learned over the years, if you reduce the cost of capital you increase your use of fixed assets and you take out jobs. Corporate America, seeing an ever increasing cost for its employee base and extraordinarily low interest rates, is taking every step it can possibly take to reduce employment, to build factories abroad and domestically to substitute technology and automated processes for people.

By way of background, Dallas Federal Reserve Bank president Richard Fisher said in 2011:

I firmly believe that the Federal Reserve has already pressed the limits of monetary policy. So-called QE2, to my way of thinking, was of doubtful efficacy, which is why I did not support it to begin with. But even if you believe the costs of QE2 were worth its purported benefits, you would be hard pressed to now say that still more liquidity, or more fuel, is called for given the more than $1.5 trillion in excess bank reserves and the substantial liquid holdings above the normal working capital needs of corporate businesses.

Similarly, former Secretary of Labor Robert Reich pointed out in 2010:

Cheaper money won’t work. Individuals aren’t borrowing because they’re still under a huge debt load. And as their homes drop in value and their jobs and wages continue to disappear, they’re not in a position to borrow. Small businesses aren’t borrowing because they have no reason to expand. Retail business is down, construction is down, even manufacturing suppliers are losing ground.

That leaves large corporations. They’ll be happy to borrow more at even lower rates than now — even though they’re already sitting on mountains of money.

But this big-business borrowing won’t create new jobs. To the contrary, large corporations have been investing their cash to pare back their payrolls.They’ve been buying new factories and facilities abroad (China, Brazil, India), and new labor-replacing software at home.

If Bernanke and company make it even cheaper to borrow, they’ll be unleashing a third corporate strategy for creating more profits but fewer jobs — mergers and acquisitions...

Link:
http://www.washingtonsblog.com/2013/05/the-fed-buying-more-assets-until-unemployment-falls-is-like-a-medieval-doctor-bleeding-a-patient-with-leeches-until-his-iron-deficiency-goes-away.html