Why Didn’t the Fed Taper? Because Congress Is Horrible.
The Federal Reserve shocked the world Wednesday with the decision to, well, keep doing what they’ve been doing for a year now. That is, the central bank is buying $85 billion in bonds every month, and will keep buying $85 billion a month for now.
So the money will keep flowing, the “taper” is postponed for another day, and the stock market is euphoric. But why? One reason is that interest rates have risen in global financial markets in the past few months, in part due to Fed signaling about the taper, which may slow growth. But for another key answer, walk out the front door of the Fed’s headquarters on Constitution Avenue, turn left, and walk 20 blocks until you run into the United States Capitol.
That was a recurring theme in the communications that emanated from the Fed and its chairman, Ben Bernanke, Wednesday afternoon. Indeed, taken together, it is a sense of frustration coming out of the nation’s central bank. He is in effect yelling, from one end of Constitution Avenue to the other, “WHAT ARE YOU DOING???” We’re busting our tails over here to try to keep this economy on track, and you clowns can’t do your jobs well enough to avoid messing the whole thing up.”
Of course, that’s not how they really talk at the Federal Reserve, especially when the cameras are going. So here’s what Bernanke and his colleagues actually said.
First, in the Fed policy committee’s formal statement, it noted that “fiscal policy is restraining economic growth” and that there has been improvement in the economy over the last year “taking into account the extent of federal fiscal retrenchment.”