"Should the Fed buy bonds?" Critique by Colin Illar

In response to the blog post "Should the Fed buy bonds?", there are many things to look at. For one, the post was very well written. The author adequately organized the post to include background information of the article as well as plenty of analysis regarding economic concepts included in the article. My only critique as to the way the article was written would be a little more expansive of a summary of the initial article. The blog post had a much bigger focus directed to analyzing the economic concepts involved in the article such as quantitative easing and Federal Reserve policies. If a broader summary of the article was given in the post, it would be easier to compare and contrast the various policy options for the Federal Reserve.

As for the analysis of the article, I find myself agreeing with the poster on a few concepts and disagreeing on others. I do agree with the analysis that more quantitative easing may not be a good policy measure by the Federal Reserve. As the article and Cole's blog post point out, quantitative easing has been tried twice before with minimal to no effect on the economy. It has kept interest rates low, which was a success, but this has not led to the desired effect. I also agree with the poster's argument that the Federal Reserve cannot fix this problem on their own. Other factors have been strongly affecting consumers willingness to spend in the economy and on bonds that are available at such a cheap rate due to the low interest rates. The easiest explanation to this could be a severe lack of consumer confidence in the market. The confidence could be affected by many factors, including the gridlock regarding new legislation to create jobs, continuing stagnation in employment numbers and increasing bad news regarding the economy, such as news that American Airlines, one of the largest airline companies declaring bankruptcy following one of the biggest travel weekends of the year. All these factors can drown out news of low interest rates and expansionary policy measures by the Federal Reserve, so until consumer confidence is stabilized, the Fed's current options will continue to under perform.

Regardless of all the analysis I agree with, I still find fault with the last statement made by the poster, that time will fix the low consumer confidence. I think that rather than time leading to more consumer confidence, I believe that more time with this little improvement will create more of a downward spiral regarding confidence. As younger generations graduate college and look for jobs in an uncertain market, it is likely to me that the low confidence will spread to the new additions to the labor force. The fed and the government need to try everything they can regarding the economy to create a higher confidence in younger people who are more likely to spend with less things to pay for.