Weekend Economists Kickoff the Season, September 6-8, 2013

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45. Federal Reserve Has A Demographics Problem An Aging Society Is Making Monetary Policy Less Effective

http://www.businessinsider.com/monetary-policy-hindered-by-demographics-2013-9

Since 2008, the Federal Reserve has kept interest rates pinned at zero, maxing out its main policy tool for stimulating the American economy following the worst recession in 80 years.

Given the disappointing nature of the recovery since then, the central bank has added unconventional monetary policy tools to the mix – foremost among them a balance-sheet expansion fueled by government bond purchases known as quantitative easing – in a bid to provide the economy with further stimulus.

Yet the effectiveness of these efforts, too, has been deemed questionable – despite several years and several trillions of dollars of bond buying, unemployment remains high and inflation remains below target – and now, the Fed is moving toward winding down quantitative easing altogether.

The reality, though, is that the effectiveness of monetary policy has actually been in decline for a long time.



Read more: http://www.businessinsider.com/monetary-policy-hindered-by-demographics-2013-9#ixzz2eIRKfZmw