海角大神

The latest jobs bill coming out of Washington isn鈥檛 really a bill at all. It鈥檚 the Fed鈥檚 attempt to keep long-term interest rates low by pumping even more money into the economy (鈥渜uantitative easing鈥� in Fed-speak).

The idea is to buy up lots of Treasury bills and other long-term debt to reduce long-term interest rates. It鈥檚 assumed that low long-term rates will push more businesses to expand capacity and hire workers; push the dollar downward and make American exports more competitive and therefore generate more jobs; and allow more Americans to refinance their homes at low rates, thereby giving them more cash to spend and thereby stimulate more jobs.

Problem is, it won鈥檛 work. Businesses won鈥檛 expand capacity and jobs because there aren鈥檛 enough consumers to buy additional goods and services.

The dollar鈥檚 drop won鈥檛 spur more exports. It will fuel more competitive devaluations by other nations determined not to lose export shares to the US and thereby drive up their own unemployment.

And middle-class and working-class Americans won鈥檛 be able to refinance their homes at low rates because banks are now under strict lending standards. They won鈥檛 lend to families whose overall incomes have dropped, whose debts have risen, or who owe more on their homes than the homes are worth 鈥� that is, most families.

So where will the easy money go? Into another stock-market bubble.

It鈥檚 already started. Stocks are up even though the rest of the economy is still down because money is already so cheap. Bondholders (who can鈥檛 get much of any return from their loans) are shifting their portfolios into stocks. Companies are buying back more shares of their own stock. And Wall Street is making more bets in the stock market with money it can borrow at almost zero percent interest.

When our elected representatives can鈥檛 and won鈥檛 come up with a real jobs program, the Fed feels pressed to come up with a fake one that blows another financial bubble. And we know what happens when financial bubbles get too big.

.

-----------------------------

海角大神 has assembled a diverse group of the best economy-related bloggers out there. Our guest bloggers are not employed or directed by the Monitor and the views expressed are the bloggers' own, as is responsibility for the content of their blogs. To contact us about a blogger, click here. This post originally ran on