THE FED AND HUMAN CAPITAL

WELCOME TO THE FIRST POST ON "DELROSSOOMICS"!

I posted the following original comment on economist.com on June 17, 2011, in response to The Economist article: "CAN THE FED TALK AMERICA OUT OF A SLUMP?":

"The Fed just printed and spent $1200BN in QE(Quantitative Easing)1 and QE2 buying Treasury Bonds. Did we gain anything from that? I don’t see it.

The Fed could have spent half of that on upgrading Americans’ human capital. As Nobel Prize winner in Economics Peter Diamond (whose Fed nomination was blocked by Republicans) wrote in the NY Times on June 6th:
“If instead the unemployment is primarily structural — caused by mismatches between the skills that companies need and the skills that workers have — aggressive Fed action to reduce it could be misguided”

Unemployed people (and know, since I am one of them), would always like to upgrade their computer (and other) skills. I know MS Excel, Word and Power Point, but there is always something new to learn. I would like to get more training in MS Access. There is always another advanced Excel class to master. When I had the money to afford to pay for such classes, by the time I had “advanced” to the Advanced Class, the instructor would oftentimes be so “rushed”, he or she would only have a few minutes to cover such topics as macros in Visual Basic, which is very sad.

The world of banking seems to be increasingly written in a foreign language, with “plain Vanilla” Credit Analysis, seeming to be as quaint as Victorian England. I do not know what Stochastic Calculus or Monte Carlo Risk Simulations are, but apparently Credit Analysts now need such tools to manage Risk. Which begs the question: Are we using the same Risk Management tools in 2011, that we used prior to the Great Crash of Sep. 2008?  Anecdotal evidence says “yes”, which is scary.  But it’s even scarier to be unemployed. But as long as employers will pay me to use such tools, I want to learn how to use them."

Today, Aug 18, 2011, I heard Catherine Hays (host of the "Hays Advantage") on Bloomberg Radio (1130 on the AM dial in NYC) say that some people worry that QE3 may not help the economy.  Well. with interest rates and yields on Treasury paper at historic lows, it's hard to see how the Fed buying $600 billion more in Treasury paper is going to help the economy by pushing rates even lower.

No matter how low rates go, if you are worried about loosing your job, you are not going to borrow money. And if you are unemployed, like this blogger, well, you are not going to borrow either.

But upgrading Human Capital may be just the shot in the arm that the economy needs.

We have to "think outside the box", or else we will never get out of the economic box we are in.