Pile-On Bernanke Gathers Steam


Well well well….

We believe the Federal Reserve’s large-scale asset purchase plan (so-called “quantitative easing”) should be reconsidered and discontinued.  We do not believe such a plan is necessary or advisable under current circumstances.  The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment.

We subscribe to your statement in the Washington Post on November 4 that “the Federal Reserve cannot solve all the economy’s problems on its own.”  In this case, we think improvements in tax, spending and regulatory policies must take precedence in a national growth program, not further monetary stimulus.

We disagree with the view that inflation needs to be pushed higher, and worry that another round of asset purchases, with interest rates still near zero over a year into the recovery, will distort financial markets and greatly complicate future Fed efforts to normalize monetary policy.

The Fed’s purchase program has also met broad opposition from other central banks and we share their concerns that quantitative easing by the Fed is neither warranted nor helpful in addressing either U.S. or global economic problems.

The signature list is….. impressive.

In response The Fed said:

“As the Chairman has said, the Federal Reserve has Congressionally-mandated objectives to help promote both increased employment and price stability. In light of persistently weak job creation and declining inflation, the Federal Open Market Committee’s recent actions reflect those mandates.  The Federal Reserve will regularly review its program in light of incoming information and is prepared to make adjustments as necessary.  The Federal Reserve is committed to both parts of its dual mandate and will take all measures to keep inflation low and stable as well as promote growth in employment.  In particular, the Fed has made all necessary preparations and is confident that it has the tools to unwind these policies at the appropriate time. The Chairman has also noted that the Federal Reserve does not believe it can solve the economy’s problems on its own.  That will take time and the combined efforts of many parties, including the central bank, Congress, the administration, regulators, and the private sector.”

Note the lie.

Price Stability does not mean “low inflation.”  It means zero inflation.

That’s what stable is.

If your income is “stable” it is neither going up or down.  If the level of water in your pool is “stable” you don’t need to put $100 a month worth of city water into it in order to keep it full because some is “leaking out” – it’s stable – that is, at the same level.

If your bank balance is “stable” then the amount of money you have is neither going up or down.

The upside for The Fed’s BS game is very low.  Your own economists think we might get a half-percent in GDP out of this.  I think they’re nuts – we’ll get less GDP, because input cost ramps create margin compression which in turn drives up risk premia in the bond market (lower prices, higher yields) and at the same time risks a stock market collapse.

A necessary condition for economic stability is a stable currency.  Stable means that I can invest tomorrow and have a reasonable belief that my money will buy the same thing in 5, 10 or 20 years that it buys today.  That is stable.

An expectation of constant debasement, which is what The Fed has pursued since 1913, has led to serial asset bubbles and ever-larger distortions in our economy.  We were blessed with huge technological advances in the 1950s and again in the 1980s – but instead of using them to build a long-term sustainable future, which requires a stable currency over decades, The Fed’s policy caused people to squander that opportunity and instead chase assets in an attempt to stay ahead of the inflation monster.

This is a colossal failure of policy and a violation of black-letter law – never mind your willful blindness to criminal activity, as exposed here (once again) below.


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