Wednesday, April 30, 2008

Just this one last time and I swear I'll never do it again.

Our text today is a phrase commonly uttered by:

Alcoholics, Pyromaniacs, Philanderers, and the US Fed Chairman?

Don't get me wrong, I think Bernanke and the Fed have done a great job addressing the credit freeze by expanding liquidity, taking shakier paper for collateral, opening the discount window wider, and yes even by having a hand in the Bear-Sterns sale (though this last achievement I agree is debatable).

However, the rate-cutting is just plain out of hand. The dollar is shot, commodity prices soaring, inflation is over 4%, the markets have been calmed, but the Fed is gonna cut the funds rate again.


"Hi, I'm Ben and I'm addicted to negative short term interest rates"? probably not.

I honestly think this is another paradoxical case of the Fed caving in to political pressure in order to save its vaunted independence.

1 comment:

Lee said...

Well said. And let's stop pointing fingers at emerging markets, OPEC, food shortages etc. for higher prices and depreciating dollar. Repeat after me: "inflation is always and everywhere..."