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The Economic Dog Days Begin

The Fed doesn't literally print money, but it can create more if it wants to try to spur the economy.
The Fed doesn't literally print money, but it can create more if it wants to try to spur the economy.

August is supposedly a quiet month on Wall Street, in Washington, D.C., and for business and finance generally. Except sometimes it isn't — and it's always the run-up to September, which can be pretty eventful in itself (think 2008 and the collapse of Fannie Mae, Freddie Mac and Lehman Bros.).

So this week is shaping up to bring August in like a lion, with several potentially significant economic developments already on the calendar.

Two of the biggest: the potential for major Federal Reserve action on Wednesday, and some much-anticipated jobs numbers on Friday.

First, the Fed. Its Federal Open Market Committee — that's the panel that nudges interest rates up and down — meets on Tuesday and Wednesday in the wake of a couple grim economic reports: The unemployment rate didn't budge in June and the country added just 80,000 jobs. Plus, economic-growth numbers released last week showed sluggish growth.

In early June, Jacob Goldstein on this blog looked at the Fed's options at the time, and they remain pretty much the same. The big question is whether we'll see QE3 — or a third round of quantitative easing. That amounts to the Fed printing money to buy financial assets from the banks, in the hopes of leaving them flush with cash and more eager to lend. (Any action is likely to come on Wednesday.)

Some question whether even significant easing will have much effect on bank lending, and whether more debt is such a good idea. But much of the chatter ahead of Wednesday's meeting is not so much about whether the Fed will do this — but about whether the Fed will do it now, or wait to see how much things improve (or worsen) before its September meeting.

Friday, of course, brings another data-point for judging just how well the economy is doing: the July jobs numbers. As we mentioned, last month's report was widely seen as disappointing; it also contained fresh indications that the problem of long-term unemployment isn't improving.

As our own Adam Davidson wrote in a recent New York Times Magazine column, the monthly jobs report is best used as a long-term gauge of economic health. This despite the fact that it has become an instant sensation that can move financial markets and even influence the very job picture it's supposed to reflect. (But if you missed it, check out the Times blog post riffing off Adam's column and describing how the job numbers come together — it's worth a read.)

There are some other events this week that have the potential to make headlines. In Europe, a Thursday meeting at the European Central Bank and Tuesday jobs numbers could herald action on Europe's debt crisis, or just more doomsaying. And in Washington, the head of the new Consumer Financial Protection Bureau delivers the agency's annual report to a sympathetic Senate committee, and a less friendly one in the House.

And this isn't even the first full week of the supposedly quiet month. Which brings us to David Plotz's tongue-in-cheek (we think) argument in Slate in 2001 to cut the month to a mere 10 days. We could get behind that.

Note: I edited the post to clarify that the Fed meets over two days, with any official moves likely coming on Wednesday.

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