Why the Fed should print more money to help U.S. economy

The Takeaway

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Republicans in Washington want to cut spending. Democrats want to tax the rich. Neither party is focusing on what really matters in today’s economy. “The real point,” according to New York Times financial writer Joe Nocera, “is lack of credit.”

“There’s nothing wrong with deficit reduction, although I happen to think that the timing for deficit reduction right now is insane,” Nocera emphasizes. “There’s certainly nothing wrong with a jobs program or stimulus, which can help on the margins.” But what makes or breaks an economy is credit, and right now, credit is in short supply in the United States.

“What often leads a recovery is the revival of housing,” Nocera says, reaching back into the history books. “The United States does not have a housing policy. There’s no credit available for housing, except that which is guaranteed by Fannie [Mae] and Freddie [Mac].”

Nocera cites the Great Depression as the biggest example. The Federal Reserve had a very tight monetary policy, meaning that they were actually discouraging credit. That “choked off the economy,” Nocera says. When Roosevelt loosed monetary policy, it actually created growth.

Now the Federal Reserve, led by Ben Bernanke, should actually start printing more money than they already have, according to Nocera. That will act as a kind of credit to get the economy going again.

That move would be exceedingly unpopular in the cost conscious atmosphere of Washington. But Nocera says that’s exactly the point. “The Fed is politically independent precisely so that Bernanke can do politically unpopular things in the face of political heat.”

When the political heat inevitably comes, Nocera says: “You feel like nobody’s read a history book, and you want to grab these guys by the throat and say, “fellas, don’t you read what happened in the 1930s? Don’t you understand that the path that you’re on is ruinous for the economic situation that we’re in right now?”

“The answer,” according to Nocera, “is they don’t. They all think that if we can just balance the budget, everything will be fine. And in fact, it will make things much worse.”


“The Takeaway” is a national morning news program, delivering the news and analysis you need to catch up, start your day, and prepare for what’s ahead. The show is a co-production of WNYC and PRI, in editorial collaboration with the BBC, The New York Times Radio, and WGBH.

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