"With the unemployment rate still well above 6.5 percent, the Federal Reserve has promised to keep buying billions of dollars of bonds in an effort to help bolster growth. The Fed’s stimulus efforts have helped buoy the markets, but the job picture has remained weak.
"Economists also noted that the number of hours worked fell in April, another sign that the economy is having trouble generating enough additional income and jobs to help lift spending.
"The government could be the wild card in the coming months. Automatic, across-the-board spending cuts officially went into effect in March, and if the mandated spending cuts continue, layoffs could increase. Apart from the job figures, the economy has been showing signs of weakness of late. Several indicators beginning in March have pointed to much slower growth, with everything from retail sales to manufacturing looking soft recently.
"“What’s the biggest drag on the economy? The government,” said Diane Swonk, chief economist for Mesirow Financial in Chicago. “If the government simply did no harm, we could be at escape velocity.”
What is the effect, long and short term, of promises to keep buying billions of dollars of bonds?
Isn't compounding the problems instead of solving them?
Cut backs on government spending means production of fewer products and layoffs.
Layoffs mean more cutbacks and layoffs.
What an I missing here?