Bernanke's bold QE2 finally explained -- with burgers and fries
Federal Reserve Chairman Ben Bernanke is using further quantitative easing to lift the US economy. But there's a big difference between creating more money and creating more value.
(Page 2 of 2)
With annual economic growth rates as high as our unemployment rates, China has plenty of action. So Mega-Multinational may well decide that the best investment is to send my five dollars along with the Marine private’s QE2 money across the sea to construct a new office park in Shanghai. Very quickly, my cash for a burger has been converted into Chinese currency, entering one of the fastest-growing economies on the planet.Skip to next paragraph
Subscribe Today to the Monitor
The destination of my five dollars may disappoint Mr. Bernanke and others who’d like to see greater activity right here in America. But it reveals an important truth about economic performance: sustainable growth springs from enterprise that’s fueled by savings – not a faster currency printing press.
QE2 can't make Americans work – or save – more
China’s growth is built on bottom-up productivity – not top-down bond buying. The Chinese people are thrifty and hard working. Released from the yoke of true communism a generation ago, they are extraordinarily entrepreneurial. They seem to have figured out that the alchemy for success is an unusual mixture of boldness and humility – the boldness to imagine the future and the humility to work and sacrifice to achieve it.
Back in the US, we are impatient. We seek comfort. We consume instead of save, buy rather than build. Our forebears did the heavy lifting to put our economy on top of the world. Can’t we just reap the rewards – a great job for life, a big house filled with the latest entertainment devices, three cars in the garage? Can’t QE2 just give us that?
It can’t, because by itself the $600 billion it represents is, like my five dollars, insubstantial and ghostlike.
Now if QE2 money inspires American business leaders to take a chance on expanding operations and hiring new people, it might lower unemployment. If it inspires discouraged workers to go out and pound the pavement for available jobs, it might increase the goods and services our economy produces. On the other hand, if it inspires us to spend more time arguing about ideology and blaming policies for our predicament, QE2 will merely increase our debt and push our economy further out of balance.
In the end, our economic success is less about our policies and more about ourselves. And that is something to be glad about. Now where’s my burger?
Paul McDonnold is the author of “The Economics of Ego Surplus,” a novel of economic terrorism. He has taught economics courses at the University of North Texas, the University of Delaware, and North Lake College in Irving, Texas.