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MOSLER'S LAW: There is no financial crisis so deep that a sufficiently large tax cut or spending increase cannot deal with it.

Fed’s Lockhart

Posted by WARREN MOSLER on September 1st, 2011

Lockhart on the tapes yesterday (non-voter):

*LOCKHART SAYS MONETARY POLICY CAN’T `BE SEEN AS A PANACEA’

Good start. How about ‘completely ineffective with regards to aggregate demand.’

*LOCKHART SAYS `DOWNSIDE RISKS TO GROWTH HAVE RISEN NOTABLY’

Even with ‘accomodative monetary policy’

*LOCKHART SAYS U.S. MAY FACE `LONG PERIOD OF SLOW GROWTH’
*LOCKHART SAYS `SLACK IN OUR ECONOMY IS RISING’

That is, it’s getting worse, even with 0 rates, QE, and all the other measures the Fed has taken to reduce interest income in the economy.

Not talk yet about being over taxed for the size govt we have.

2 Responses to “Fed’s Lockhart”

  1. JKH Says:

    The idea that the Fed has withdrawn income from the private sector could be captured as well by the fact that the Fed has engaged in direct fiscal tightening with QE. The tightening shows up clearly in the form of the marginal surplus that increased Fed profits contribute to Treasury.

    Suppose QE were accompanied by a direct fiscal offset, such as some sort of tax cut, designed to reverse the direct dollar impact of the Fed’s fiscal tightening.

    How would you interpret the net effect of QE in that case?

    Reply

    Mario Reply:

    @JKH,

    interestingly I recall reading a quote by Thomas Edison stating that all net income earned by the Fed should be considered the people’s money and dispersed as such (perhaps through refundable tax credits?). I love that idea…and I love even more that it’s coming from Thomas Edison!??!?! :D

    I’d say in that case that QE would have zero influence positive or negative outside of the actual asset re-distribution differences of bonds versus cash in the private sector. yeah?

    Reply

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