"Exactly the reason for the imbalances and the reason why the
system is less stable! The Fed no longer controls it's own
destiny. "
Yes, they lost control in 2008, then started the fix of
last resort - a major printing effort. Not just the Fed, every
CB around the globe, in a coordinated G7/G20 action. Britain
printed more than we did, and Europe printed some. Everyone
did the same thing, because their whole monetary policy approach
is flawed, geared toward a short term benefit (shallow
recession with moderate job losses in the past) at the expense
of creating long term imbalances.
Sure, it works. Liquidity/guarantees were unlimited , and that predictably
stopped the crash. However, the problem with this "solution" is
that it was precisely the thing that created the problem!
Personally, I think this may have been necessary, but unless
the financial system is reformed, we will be facing yet another
derivative meltdown. "The plan" is to do the reform once
the crisis passes. One can be optimistic and say they will
work this out eventually, but we have to see how it all
goes. Personally, my guess is that there will be reforms,
but they will not go smoothly.
Difficult times still lie ahead. |
