Thursday, August 11, 2011

The Anti-prudent Fed

"I am wary of Bernanke’s sudden change of heart on headline inflation. It confirms my suspicion that the Fed is deliberately bringing about inflation and currency debasement to cushion the effects of debt-deleveraging. This amounts to a soft default on America’s debts.

QE1 was an entirely appropriate response to the threat of spiralling collapse and an implosion of the money supply. I backed it whole-heartedly, and make no apologies for doing so.

QE2 was a different animal. The threat of imminent deflation was bogus. The effect was to juice stock prices and increase the asset wealth of the rich, hoping for a trickle down. In reality it punished poor people through rising food and fuel costs long before any trickle came through.

Needless to say, it also punishes prudent savers in order to rescue improvident and promiscuous borrowers. This has immense social and moral consequences over time, and risks undermining the virtues that made America the world’s paramount power.

The Fed has done its job. What is needed now is for business to be incentivized to commit that liquidity to creating American jobs. This is the task of the fiscal authorities, not the Federal Reserve.”
The Fed is engaged in dangerous forms of social engineering. Central banks should never enter this territory."

The Fed is a Rogue Elephant (wonkish rant) - Ambrose Evans-Pritchard

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