You Can't Print Production and Prosperity

It's hard to imagine that the monetary policy talk can get any nuttier, but we've likely only just begun. After all, despite the Federal Reserve growing its balance sheet by 140 percent and dropping rates essentially to zero, the bankruptcies just keep on coming. Ex-Fed governor Wayne Angell told Larry Kudlow's CNBC audience, "monetary policy always works!" Although Angell does stipulate that it takes time before the tromping on the monetary gas pedal will spin the economic tires and spray the prosperity gravel. But good grief, the Fed started cutting rates in September 2007, dropping the federal-funds rate from 5.25 percent to 4.75 percent, and it was cut, cut, cut until daddy set the target rate at 0 to .25 percent in December of last year. In the meantime, one trillion dollars has been added to the M-2 money supply. Despite all this money creation, Circuit City, Sharper Image, Goody's, Gottschalk's, Comp USA, Levitz Furniture, Chrysler, General Motors, General Properties, and — most recently — Eddie Bauer have filed for bankruptcy protection. And personal bankruptcy filings are up in every state and soaring in Nevada, Georgia, Alabama, Tennessee, Indiana, and Michigan. In May, forty-eight states had more people out of work than in the previous month or year, with the national unemployment rate increasing from 8.9 percent to 9.4 percent. Moreover, ...

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