America has nothing to show for 15 years of ultra-easy monetary policy and a Federal Reserve that has been allowed to run amok with the nation's future, according to David Stockman
, White House budget chief in the Reagan administration.
Stockman ticked off a list of conspicuous central bank actions and largesse from Washington over the past decade and a half. The items included a $700 billion Troubled Asset Relief Program (TARP), $800 billion of fiscal stimulus, about $4 trillion of money printing and 165 months of artificial rock-bottom interest rates.
"You'd think with all that help from Washington that American capitalism would be booming with prosperity," he wrote on his Contra Corner blog. "On the measures which count when it comes to sustainable growth and real wealth creation, the trends are slipping backwards — not leaping higher."
Stockman noted that the number of "breadwinner jobs" in America is still 2 million below levels hit in the Clinton administration.
He added that nonfinancial business productivity has risen at only 1.1 percent per annum in recent years — only half the 2.2 percent annual gain from 1953 until 2000.
Stockman pointed out one big difference between the Eisenhower, Kennedy and Johnson eras and contemporary presidencies is that those earlier administrations believed in balanced budgets.
Former Fed Chairman William McChesney Martin, who headed the central bank from 1951 to 1970, once took away the "punch bowl" of monetary stimulus only four months after a recovery commenced, "unlike the Bernanke/Yellen Fed that can't get its hand off the stimulus button 70 months after the Great Recession ended," he noted.
Stockman said real median income in the U.S. was $53,000 in 2014. "That means median living standards of US households have been falling at a 0.5 percent annual rate since the turn of the century. There is no prior 15 year period that bad, including the 15 years after the 1929 crash."
In the area of jobs, he explained that since 2000, even as the Fed's balance sheet skyrocketed, the prime-age labor force participation rate has dived 10 percentage points.
On a net basis, he concluded, the only jobs created during this entire century are in the health, education and social services arenas. "The thing is these jobs have nothing to do with cheap interest rates and easy credit. They are a function of the entitlement state and the massive $200 billion per year of tax subsidies, which support employer-funded health benefits."
The bottom line is that the Fed has been swapping temporary gains in GDP for real economic growth, in Stockman's view.
"So the Fed blunders forward, oblivious to the fact that it is now 2015, not 1965, maintaining the lunacy of zero or soon near-zero interest rates," he wrote. "The Fed has thus become little more than a serial bubble machine."
Former Fed Chair Ben Bernanke
would likely take issue with Stockman's conclusions.
In his blog published on the Brookings Institution website, Bernanke wrote: "Although the recovery has not been as fast as hoped — in part because of 'headwinds' arising from fiscal policy, the after-effects of the financial crisis and other factors — today the jobs situation in the United States is much better than a few years ago, and the risk of deflation is very low. Fed policies have had a lot to do with that."
In Bernanke's view, financial regulators — as opposed to the monetary policy brain trust at the Fed — did not do enough to avoid the economic crisis of 2007-09 that led to the nation's financial meltdown.
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