Editorial: The Fed Should Go On Vacation

[Geee]

Investors Business Daily:

Economy: Fed Chairman Ben Bernanke, in a much-anticipated speech at the central bank's annual Jackson Hole gathering, said he has no immediate plans to do anything dramatic. To which we say: good.

Three years of hyperactive policy intervention, during which the Fed has printed trillions of new dollars, clearly hasn't worked. Why pile one failure on top of another?

Even so, Bernanke told the Jackson Hole, Wyo., gathering he has still more tricks up his sleeve, and hinted he might unveil something next month. "The Fed has a range of tools that could be used to provide additional monetary stimulus," he said.

More tools? If this were a gunfight, Bernanke would be out of bullets. Two rounds of quantitative easing since 2008 have pumped an estimated $2.3 trillion into the banking system. What do we have to show for it?

On Friday, the Commerce Department reported that the economy grew just 1% in the second quarter, below the 1.4% first estimated. For the entire first half, GDP was up just 0.7%, a pathetic performance this far along in a recovery (see accompanying editorial at right).

Fact is, the economy seems to be sliding, despite the massive Fed stimulus of zero percent interest rates and more than $2 trillion in newly printed money.

The Congressional Budget Office warned last week that unemployment would likely remain above 8% for years to come, while this year's federal deficit would again hit $1.3 trillion — despite White House promises deficits would be falling fast by now.

Why haven't the Fed's actions worked? Because our problems today aren't monetary in nature. They're fiscal. As such, printing more money won't help one bit. Our economy suffers from too much spending, too many regulations and far too much uncertainty. Businesses lack confidence. The Fed can do nothing.