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What it will take to get a 6.5% unemployment rate
Federal Reserve Chairman Ben Bernanke holds a press conference following a Federal Open Market Committee meeting at the Federal Reserve Bank headquarters Dec. 12, 2012 in Washington, D.C. The Federal Reserve announced it would continue its monthly purchase of $85 million in Treasury bonds and mortgage-backed securities until the outlook for the labor market improves.
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The major business news this week came from the Federal Reserve's meeting, and Chairman Ben Bernanke's announcement that the Fed will keep interest rates at-or-near zero until unemployment rates drop to 6.5 percent. It's the first time the central bank has put a number on its policy decisions.
But what will it take to get to that 6.5 percent rate? The Weekly Wrap will take a look later on today's show.
In the meantime, here are what our guests this week suggest for your reading list this weekend. The New York Times' Catherine Rampell recommends:
- Jill Lepore's article from April about gun laws in the United States
- How big vs. small companies might be affected by the tax proposals Congress is considering
- Bruce Bartlett on the real long-term budget problem
And Reuters finance blogger Felix Salmon suggests these longreads:
- NewStatesman's Steven Poole on the invasion of cyberhustlers
- The Kansas City Star's beef investigation
- Bloomberg Markets on how Israeli billionaire Dan Gertler has profited off the Congo
Our Weekly Wrappers weren't surprised by the Federal Reserve's 6.5 percent announcement.
"I think it makes a lot of sense," says Rampell. "And actually, the Fed did not really change its projection on when it would be lowering rates in terms of year-terms. When we get down to 6.5 percent is about where we would be when the Fed said they would be lowering rates back under the old regime. And one advantage of using this system where they peg it to a number, as opposed to a year, is that they don't have to keep on pushing out their estimate for how long it's going to be when they...tighten monetary policy, which could be bad for confidence."
Some are forecasting that the 6.5 percent rate could come around in 2014. But Salmon says it'll be difficult to tell.
"One of the problems is that we really have no idea -- the headline unemployment rate is a very fuzzy number," says Salmon. "We're not having a hard 6.5 percent...target. They're just saying 'We want unemployment to come down to something vaguely tolerable.' And that's what 6.5 percent is."
So it's pretty clear that the Fed by itself, cannot create jobs. So who is going to lead us out of this quagmire? I don't think the banks have a chance to lead us out of this mess they created. So who's left? I'm facing my third holiday in the past four years in some sort of unemployment state. I've worked a couple decades before ever being RIFd, so the past four years have been hell. And it's not just me either. I know plenty of people in the same boat. I don't think unemployment is at 7.7% either. Let me tell you, when you're looking for a job, you see the unemployment rate at 100%.
It will take removing Ben Bernanke and installing someone who has a vision of America's economy as one with a modest financial industry. Everyone understands that 0% interest gives banks and corporations free money to invest in the stock market rather than in work....hiring and it is singularly the policy that is creating stagnation. Secondly, when the Fed policy embraces growing global markets that means all of the money and resources will go towards overseas development, which it is now, not into domestic markets. Allowing failed banks to go bankrupt means downsizing banks and building the domestic economy. Third, when QE policy driving mortgage interest to zero as well occurs when most in the country are struggling financially because of the last massive fraud the Fed created, one thinks that the policy may be directed towards giving bargain basement prices to the same people who created the subprime loans and are now buying them in investment bundles as forecloures giving these same people not only housing on the cheap.....but rentals that will control who lives in these urban areas originally targeted for the subprime loans. Poor neighborhoods turning affluent means big money. I think it is pretty obvious that is for what Bernanke works with these policies.
It will take removing Ben Bernanke and installing someone who has a vision of America's economy as one with a modest financial industry. Everyone understands that 0% interest gives banks and corporations free money to invest in the stock market rather than in work....hiring and it is singularly the policy that is creating stagnation. Secondly, when the Fed policy embraces growing global markets that means all of the money and resources will go towards overseas development, which it is now, not into domestic markets. Allowing failed banks to go bankrupt means downsizing banks and building the domestic economy. Third, when QE policy driving mortgage interest to zero as well occurs when most in the country are struggling financially because of the last massive fraud the Fed created, one thinks that the policy may be directed towards giving bargain basement prices to the same people who created the subprime loans and are now buying them in investment bundles as forecloures giving these same people not only housing on the cheap.....but rentals that will control who lives in these urban areas originally targeted for the subprime loans. Poor neighborhoods turning affluent means big money. I think it is pretty obvious that is for what Bernanke works with these policies.
