The Problem Is Too Big for the Fed

 | Nov 21, 2013 | 11:25 AM EST  | Comments
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jcp

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dltr

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bby

How can Target (TGT), Wal-Mart (WMT), Kohl's (KSS), J.C. Penney (JCP), Dollar Tree (DLTR) and Best Buy (BBY) say things are tough and we're supposed to be worried that the Federal Reserve is going to stop trying to keep interest rates down?

Is that the biggest worry we can come up with?

The whole debate about Washington needs to be stood on its head. We need an increase in jobs and an increase in purchasing power.

The problem is too big for the Fed. It's doing its best at a time when no other end of the government is doing anything to help stimulate jobs, and it's a little crazy when you think about it.

What's really needed? I had hoped that Washington would embrace the natural gas revolution and start using its buying power to request natural-gas-powered trucks and cars for its vast vehicle fleets. I wanted that, because that's the horse that has to be put before the cart of a gigantic change in the way we think about energy in this country. While we can debate how much oil we have and whether we are near peak oil production, there's no debating that we have a glut of natural gas. I can't imagine how a product will be in short supply over the next 20 or 30 years when we are literally burning off more than we use as a natural by-product of oil drilling.

It seems so simple: You stimulate the demand by buying cars and trucks that save the taxpayer money, which then triggers huge orders for more engines and all of the accoutrements as well as a nationwide build-out of natural-gas stations. It could be the biggest non-public-works project in history.

Alternatively, now I have to wonder whether the president would be able to cross the aisle and call for a one-time-only corporate tax cut to repatriate all of the money that's being kept overseas, and then you need to take that money and put it in a gigantic infrastructure bank, and then lever it to rebuild roads, bridges, tunnels, you name it. I figure at least $1.5 trillion would flow back, and if you simply lever it three times up, you could be creating as many jobs relative to the country as were created by the build-out of the interstate highway system.

The issue with just stopping the bond buying is that you know, right now, when so many Americans are worried about losing healthcare, the spending numbers will drop even further, and we know that low rates do stimulate economic activity.

But the Fed can't create jobs, per se. It can't create shovel-ready projects. That's up to the president and Congress.

Right now, the parties seem incapable of even doing something like corporate tax reform, even as I believe that people in both parties want it done. Until then, you have to stick with the idea that the Fed can't let rates go up unimpeded. There simply isn't enough consumer spending going on, as represented by these shortfalls, to justify a tighter-fisted Fed. The only real reason for fighting the program is that it might stimulate inflation.

But we know from the numbers that it hasn't done that at all. So I would argue it's just something that can create wealth, which should then be transferred into creating jobs. It's not that the cycle isn't occurring. It's just that it isn't bold enough. The problem is too big. The solution must come from the other branches of government that are doing so much to frustrate growth, not create it.

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