G20 leaders meet amid strains as US splashes cash
“Splashes Cash”? If the AP’s headline writer was trying to be cute, it didn’t work for me. Sadly, replacing “splashes” with “trashes” might have been more appropriate, but of course less “funny.”
The cash splash/trash is the U.S. Federal Reserve’s recently announced $600 billion second round of the “money from nothing” scheme known as “quantitative easing.”
Most of the rest of the nations whose officials are attending the G-20 Summit in Seoul also lack the AP headline writer’s alleged “humor.”
AP Business Writer Kelly Olsen mostly played her reporting straight, but two of her paragraphs were odd and oddly placed, respectively. The first quotes President Obama, who apparently doesn’t understand what the Fed’s mission is supposed to be:
As the Group of 20 major rich and developing nations prepare to meet in Seoul, President Barack Obama defended the Fed. He said the central bank was following its mandate to “grow our economy.”
This is odd, because growing the economy has never been an explicit part of the Fed’s mission. Page 15 of the its most recent “Purposes and Functions” report (a very large PDF) says the following:
Goals of Monetary Policy
The goals of monetary policy are spelled out in the Federal Reserve Act, which specifies that the Board of Governors and the Federal Open Market Committee should seek “to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” Stable prices in the long run are a precondition for maximum sustainable output growth and employment as well as moderate long-term interest rates.
This is no mere quibble. The Fed is supposed to create the conditions that might enable economic growth to occur. Its mission isn’t to somehow directly intervene with the express intent to “grow the economy.” President Obama seems to be outsourcing responsibility for how the economy performs to the Fed, as if Congress and the Executive branch have nothing to do with it — and conveniently, have had little or nothing to do with the pathetic economic growth that has occurred during this alleged “recovery.” Nice try, guy. No sale.
Olsen’s other paragraph was odd because of how late it appeared (at Paragraph 16) in her report:
But tensions re-emerged when the Fed announced its bond buying plan last Wednesday. Aside from concerns about exports, the massive increase in the supply of dollars is a potential threat to the wealth of many nations because the bulk of their foreign currency reserves are stored in dollar-denominated assets.
Uh, yeah, if Ben Bernanke and the Fed inflate the currency, assets denominated in dollars becomes worth less. If they allow the situation to get out of control, the dollar will become nearly worthless.
Memo to AP headline writer: This possibility is decidedly not funny.
Cross-posted at NewsBusters.org.