Big picture: technology trumps financial engineering

From the WSJ Wednesday:

For all the Fed has done, it hasn't managed to spur job creation. U.S. output may be returning to prerecession levels, but the total number of nonfarm workers still is more than seven million shy of its December 2007 peak, and in fact is back at 1999 levels.

More broadly, the Fed's failure reflects a longstanding flaw in its approach. For years, it has been pushing interest rates lower, doing so after each successive downturn as inflation became less and less of a concern. But that wasn't simply due to successful monetary policy. Technological innovation, the globalization of the work force and demographic change had plenty to do with it, too.

Instead of being a cure-all, the Fed's policies spawned two great asset bubbles, first in stocks, then in real estate. Economic rebounds and job creation lagged behind, despite the Fed's Herculean efforts.
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The only real fix is to lower the cost of U.S. workers relative to foreign rivals and machines, or else raise their bang for the buck. The latter, while clearly preferable, requires education and training that won't turn things around overnight.