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How will we know the Fed’s boost helped the economy?

Marketplace Staff Nov 19, 2010
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How will we know the Fed’s boost helped the economy?

Marketplace Staff Nov 19, 2010
HTML EMBED:
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TEXT OF INTERVIEW

STEVE CHIOTAKIS: In Germany today, Federal Reserve Chairman Ben Bernanke defended the Fed’s decision to boost the U.S. economy, which has gotten hammered around the world that decision is a ploy to manipulate the dollar and leave other economies in the dust. I’m talking about the recent decision to pump $600 billion more dollars into the U.S. economy.

Jill Schlesinger is editor at large for CBS/MoneyWatch, and she’s with us every Friday, live from New York.

JILL SCHLESINGER: Good morning.

CHIOTAKIS: Remind us what this plan was supposed to do?

SCHLESINGER: The main goal was the spur the economy through low interest rates. And those low rates would induce banks to lend the some trillion dollars, they have kicking around, encourage consumers to borrow and spend more freely, and help companies gain confidence. That why they’d increase their spending, and create jobs.

CHIOTAKIS: Create jobs — alright. We’ve actually gotten some positive signs — including jobless claims that are trending lower, and fewer people falling behind on mortgage payments — was this the Fed having an affect on that or was the economy that was already turning around?

SCHLESINGER: It’s really unclear right now. Proponents of the Fed policy say that although the economy is in recovery, the current two percent growth rate is just not enough to create jobs and clearly jobs are the key to a sustained, broadbased recovery.

CHIOTAKIS: Fast forward six months Jill, a year — how are we going to know it worked?

SCHLESINGER: I think we would have to see interest rates low enough to help consumers pay down all that debt that they still have. They’d be able to borrow to buy new homes and cars. The banks would be lending to consumers and companies alike, and most importantly, as demand for good and services increased, companies would be adding to their pay rolls to the tune of more than say, 200,000 jobs a month for a bunch of months in a row. That would be the a fantastic success. Keep your fingers crossed buddy.

CHIOTAKIS: That’s how we’ll know — fingers are crossed. Jill Schlesinger, from CBS Moneywatch. Thanks!

SCHLESINGER: Great to be with you.

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