They [Fed BoG] control interest rates. In fact, they only directly control short term rates. Indirectly, through the “twist” and QE, they can target longer term rates. But that’s almost all she wrote when it comes to what’s under their direct control.
Don’t get me wrong—that ain’t nothin,’ especially in normal times. But the price of capital isn’t so much the issue right now. Borrowing’s cheap, it has been for a while, and corporate cash reserves are flush. The missing ingredient is demand. Without that, the Fed is pushing on a string.Read it at On The Economy
The Limits of the Fed
by Jared Bernstein
Jared Bernstein gets it.