Thursday, February 03, 2011

Not Interested in Charlie Sheen's Stomach Ache

So I've been watching Al Jazeera's streaming coverage of Egypt, and reading posts like this and scary reports like this:

Fed's Hoenig says QE3 "may get discussed"

The Federal Reserve could debate extending its bond-buying program beyond June if U.S. economic data prove weaker than policymakers expect, Kansas City Fed President Thomas Hoenig said.

Another round of bond buying "may get discussed" if the numbers look "disappointing," Hoenig told Market News International in an interview published on Tuesday.

And that's the Fed's most strident hawk.

I haven't posted much about the Fed and Bernanke recently. The current situation -- an unelected zealot conjuring up billions every day and inflating yet another asset market bubble, apparently immune from any effective checks on his conduct and with no consequences for his past incompetence and complicity -- is too disheartening. But I wonder if there is any debate or even understanding within the Fed of the global consequences of its current policy, which is contributing to unrest in the Middle East and elsewhere via rising food and commodity prices.

A few months ago I had drinks with a congressional staffer, and we talked about the symbiotic relationship between Congress and the Fed. It's a tacit understanding: politicians need the Fed to effectively finance projects in their home districts and create trickle-down tax receipts (have you heard any elected officials express concern about the current stock market bubble?). In return, the Fed expects minimal oversight and criticism.

This arrangement is nothing new, but the economic consequences have never been more obvious. Except for a small group that includes Ron and Rand Paul, DeMint, Vitter and a few others, there really is no desire in DC to rein in the Fed before it crashes the system yet again and takes a lot of the world with it. As I said: disheartening.

344 Comments:

Anonymous Anonymous said...

Brings a new meaning to the phrase "long-only bias".

By the way, I used to think these dudes at the Fed *really know* what's up, thus their statements/speeches are just a part of the job description.

As in, "Good news! Inflation is really low... wink, wink...(LOL)"

Now I have come to realize they actually believe what they're saying and doing. They're not ignoring their awful track record; they would disagree there's an awful track record.

So no, I don't think they even remotely consider food prices/Egypt to be related. That gives them way too much credit.
jw

2/04/2011 12:19 AM  
Anonymous Anonymous said...

Regarding Sheen, which one don't you like: the taste of the bread or the sight of the circuses?

2/04/2011 1:24 AM  
Anonymous Wild Goose said...

The Fed's mandate is full employment and inflation under control. Unemployment is high and inflation is low with effectively zero interest rates, so what *should* they do?

2/04/2011 8:27 AM  
Anonymous goldhorder said...

The global reserve roll of the dollar is still in place. We are exporting our inflation. Inflation is not in control in the middle east. TCR points out the FED is partly responsible for the unrest. They have been living under this dictator for 30 years...grumbling and bearing it...until they couldn't afford to eat anymore.

What should the FED do? The fed should raise interest rates to encourage saving and investing. How do you have capitalism without capital? The big banks run the economy because they are first in line at the printing press. This needs to change or this country will be rioting like the Egyptians...if the dollar goes down we all go down.

2/05/2011 12:22 PM  
Anonymous Anonymous said...

That the Feds severest critics in congress are the most reactionary rightists is a feather in the Feds hat. Making it impossible to be critical of Fed and not be painted as a loon. Now you might argue Ron Paul isn't a reactionary but most of his followers are and his base has always been filled with devoted neo confederates.

As long as stocks and financial assets do not deflate no amount of words is going to even nick them. If and when they do deflate in the face of more new Fed printing and pumping then the Fed is dead.

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