Federal Reserve Chairman Ben Bernanke's news conference today wasn't exactly full of surprises. Though he announced the extension of a stimulus program, he was cautious about our country's economic recovery or his ability to do much more.
Instead, he called on Congress to provide the political stability on which a sound, long-term economic policy could be built. But can we afford to wait for that to happen? Erin Burnett discusses with economists Stephen Moore and Robert Reich.
Erin & Company, you had an intriguing segment on Bernanke printing money, but there's a subtle point that should be explored in a future segment. The tone of Erin's lead-in was that the Fed was spending money, whereas Robert Reich correctly pointed out the Fed was printing money. I believe the US is in a truly unique place where the consequence of printing money by the Fed is not nearly as bad as it sounds.
Here's why the US is in an incredibly awesome situation. The can print more money to buy US government bonds. What does this cost the US government? Nothing – it saves money. First it lowers the interest rate the US Treasury pays on other bonds. But the second point is more subtle. Yes, we must pay interest on those bonds. That interest goes to the Fed, but then where does it go? The Fed is required by law to deposit all profits from its operations to the US Treasury. The government is paying money to our banking regulatory organization, who then pays that money back to the government, all the while lowering the interest rate for the rest of the debt. This is a stroke of financial genius, and is only possible because we issue debt in our own currency, which we control.
The fear as pointed out by your Wall Street Journal guest is this will spark inflation – that was true about QE1 and QE2, but not with Operation Twist. And the US dollar will remain a stable currency for investors until Europe forms a new political union in a few years. While obviously infinite government spending isn't the path to a fiscally responsible government, and as your segment pointed out we're getting less bang for the buck. But, if it saves the government money withno obvious downsides, why should we stop?
I know Erin knows this from her CNBC days, but it is a subtle point that is easy for viewers to overlook.
But if you could please explore this issue in a future segment (and talk less about court cases affecting just a few individuals), I'd appreciate it.
Love the show (and Erin's previous work),
censorship is obviously alive and well at this site. lively and courteous? what a farce.
why did you take down last post?
Erin, I spent twelve years in research and what I and the others found would shock you and most other Americans. We had net working in most of the States, so our reach was deep and long. You misspoke when you stated: “At least our taxes are not as high as France!” Actually they are, and here is how. All large corporations have in house CPA (s) and accountants that figure what their overhead is prior to each quarter. Corp. Taxes is a part of their overhead, so it is added to the price they charge their dealers, or consumers on their products. Some times these products go through three or four other companies before the consumers buy them, each adding on the cost of their taxes. The consumer actually ends up discharging on the product they purchased as well as all the taxes owed by the corporations handling the product.
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Erin Burnett OutFront airs weeknights at 7 p.m. ET. Designed to showcase Erin's unique style--casual, smart, and confident--OutFront stays ahead of the headlines, delivering a show that's in-depth and informative.
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