Conceptually, ZIRP has worked. The stock market is up 12 percent in 2012. Bank stocks like Bank of America’s have doubled off their lows. Real estate investment trusts, or REITs, are up 15 percent. Yet in the real world, ZIRP is a huge FAIL. GDP growth in 2012 will come in at an anemic 2 percent after a 1.7 percent tick up in 2011. ZIRP is not growing the economy. And no growth means no jobs.
Unemployment is still a nasty 7.7 percent. And talk in hushed tones to Wall Street hedge funds, and they may explain the dollar carry trade, the one where you borrow or even short U.S. dollars and buy currencies, bonds, and stocks in higher yielding, emerging market countries—yes, the Fed is stimulating, but in places like India, South Africa, and Brazil.
In a “beatings will continue until morale improves” announcement, the Federal Open Market Committee, on September 13, declared, “If the outlook for the labor market does not improve substantially, the Committee will continue its purchases of agency mortgage-backed securities, undertake additional asset purchases, and employ its other policy tools as appropriate until such improvement is achieved in a context of price stability.”