(Hat Tip to mortgage angel for data)
Somebody needs to tell Fed Chairman Bernanke. From his speech this week in Jackson Hole:
Fiscal policy--including stimulus packages, expansions of the social safety net, and the countercyclical spending and tax policies known collectively as automatic stabilizers--also helped to arrest the global decline. Once demand began to stabilize, firms gained sufficient confidence to increase production and slow the rapid liquidation of inventories that they had begun during the contraction. Expansionary fiscal policies and a powerful inventory cycle, helped by a recovery in international trade and improved financial conditions, fueled a significant pickup in growth.
At best, though, fiscal impetus and the inventory cycle can drive recovery only temporarily......
How's that? If not Fiscal Policy, then how can Monetary Policy help at the 0% bound? The only "tools" he has left rely on the "Quantity Theory" of money (increasing the so-called "Money Supply"), and this theory has been laid bare as another economic fraud in recent events that have seen money "measures" increase asymptotically while output, employment and indeed many prices have fallen.
It's over Mr. Chairman, the 30-year "Golden Age of Monetary Policy" that started when a former Fed raised the Policy Rate to 20% and ushered in a 30 year era where the Fed could consistently reduce policy rates over this time is now at the zero bound and has ended. Fiscal Policy is all we've got now...as Mike has said "somebody has got to spend".
The sooner our policy makers realize this the better.