By Doug French
Grasping for reasons why his multiple QEs and Fed balance-sheet-bursting policies haven't spurred economic activity, Dr. Bernanke posited a new diagnosis last week in Minneapolis. "Consumers are depressed beyond reason or expectation," the New York Times paraphrased the Fed chief as saying.
Even though unemployment is high, price inflation is up, home values are down, and many people are deep in hock, Bernanke thinks the funk that average folks are in is too deep. "Households seem exceptionally cautious," Bernanke said. "Indeed, readings on consumer confidence have fallen substantially in recent months as people have become more pessimistic about both economic conditions and their own financial prospects."
Bernanke described the business sector of the economy as "more upbeat." Exporters have benefited from a weak dollar, and investment in equipment and software has increased. What the Fed chair didn't say was that since the second quarter of 2009, "Spending on equipment and software has risen 25.6 percent in the last seven quarters, while companies' aggregate spending on employees has risen only 2.2 percent," as New York Times economics reporter Catherine Rampell explained recently.
Rampell points out that the gap between hiring and capital spending is wider than any other post-recession recovery and puts her finger on the reason. "One reason hiring has been so sluggish is that… (Read the full article)
Source: Mises.org
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