From Ron Sen:
Princeton's Fed Chair Professor came out of the shadows today, proclaiming:
"In sum, achieving price stability is not only important in itself; it is also central to attaining the Federal Reserve's other mandated objectives of maximum sustainable employment and moderate long-term interest rates."
My son, Conor (with a degree in Economics, and market experience beyond his years) wondered, is "maximum sustainable employment" really one of the Fed's mandates, or is that something the Greenspan Fed started? As I recall, the Fed was chartered to provide liquidity for the needs of business and regulate the currency, not to delve into every facet of the economy. Although it's not explicitly stated in this morning's text, it sounds like Bernanke actually wants to set GDP growth, inflation rates, long-term interest rates, the unemployment rate, the severity of a housing correction, and who knows what else. What's next, the quantity of toothpaste on supermarket shelves? Doesn't sound that different from the old Soviet Union to me."
One very astute market observer replied: "It's no different. And no, such "mandates" were not part of the original fed legislation. Far from it..."
A hedge fund manager added:
The Fed's members have written 14 papers over the last few years describing unorthodox methods to force consumers to accept the credit that they offer (continuation of the credit expansion is essential now to economies). The least drastic is buying risky assets as described above. The most drastic of these ideas is negative interest rates: penalize savers for not spending money by making any saver who hold cash required to pay interest instead of receive it.
Our fore-fathers warned about giving government the ability to print money (no control or restraint on credit). They understood that giving this power to the government is the ultimate power and that it would eventually end in tyranny: massive control over the populace by a few in government. It saps the will from the populace to get produce (look what happened to the Soviet Union and communism): if the government owns everything, than why work?
We are witnessing an economic revolution right before our eyes and no one is saying anything about it.
What we have is not intervention, but desperation, acts of the managers of a system run by credit, and yet still with slowing velocity of money. Debt and spending run amok, the Federal Reserve aims to repeal the business cycle and create a new economic paradigm, based on, what?
Summary: The market says everything is beautiful, in its own way. The balance sheets are robust, and consumer spending bountiful, and interest rates relatively low, and inflation low. Who am I to argue? Helicopter Ben says that policy will depend on data. Who is he kidding? To quote Richard Russell, it's "inflate or die". |
