Emily G. Murphy
Econ 122
Dr. Kassens
June 26, 2013
A Critique of Why
Taper by Matt Kessler
This
article featured in the Economist discusses the Fed’s recent announcement that
they are near tapering down their $85 billion a month buying of assets,
particularly bonds. However, the Fed
maintains that this tapering will depend on economic conditions. What this article is really concerned with is
the question of, why the Fed has all of the sudden made the judgment call that there
has been enough progress to warrant even thinking about the tapering of asset
purchases? The article presents many
forms of “evidence” that the economy hasn’t progressed enough for the Fed to be
considering such action. The first is
that it is difficult to see significant improvement in the labor market
trend. This slow, even questionable
improvement is shown in a more descriptive manner with a chart from the St. Louis
Fed’s website. This chart does however
show some stabilization in payroll records as Matt Kessler mentions in his original
blog entry on this article which I agree is present.
I do
agree with Matt’s statement that “even if payroll records are stabilizing and
the economy is doing a better job at dealing with taxes, the recession is still
having an effect on the economy.” (Kessler)
The article continues on to state that the unemployment rate trend doesn’t
look particularly promising either. The
article even goes as far as maintaining that if this trend sticks we could be
looking at an unemployment rate that may, “may,” finally fall at least a little
below six percent by the end of 2015. This
of course is not too optimistic of an outlook.
The article also mentions that other labor market indicators show a
similarly sorry pattern. The idea of
continued disinflation is included in this article as it pertains to a recent
Consumer Price Index (CPI) release. The article
concludes by informing us that Ben Bernanke’s task will be to explain why such disappointing
factors justify the likely cut in asset purchases by the end of this year, even
though the Fed is far behind their stated goals.
This
article discusses various topics we have covered in class. One such topic is the importance of labor
market conditions to the overall health of the economy. Also the article explicitly the importance of
unemployment rates to the overall health of the economy. We know from class that low unemployment can
signal a stronger GDP as output will grow with the number of employed workers. Matt does a great job of bringing in the
issue of policy meant to constrict and policy meant to expand the economy,
which we also discussed the ramifications of each situation in depth in class.
Overall
I think Matt did a wonderful job of summing up the article in his own word and
giving an in depth analysis of this issues presented in this article. Matt also did an excellent job of bringing up
the fact that this is just not a completely constricting policy but an attempt
to scale back an expansionary policy. I
also deeply approve of Matt’s source, The
Economist, as it is the same source I used and a source I frequently read
to stay on top of the news.
Works Cited: "Monetary
Policy Bernanke: Mission Accomplished." The Economist. N.p.,
n.d. Web. 20 June 2013.
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