Skip past the menu Skip to accessibility controls

So Far From the Straight and Narrow: The Fed’s Endless Overcorrections

The Maven  ( Original )
FEB 21, 2018

Remember when you were a kid and you’d get going fast, too fast, down a big hill? What seemed like a small correction to get you back on course turned out to be too much due to the tremendous accrued momentum. So in order not to end up in a ditch, you’d have to correct your correction, harder this time. In the end, you ended up veering wildly side to side just trying not to crash.

Thus the Fed. Small, innocuous-seeming market intervention has metastasized into something wildly out of control.

The Fed bailed out the banks in 2000. At that time banks were troubled by soured dotcom bubble loans and loans to foreign countries like Argentina.

The result was a housing bubble, as Greenspan kept interest rates too low, too long.

In 2009, the Fed bailed out the banks when the housing bubble burst.

Since then, the Fed’s inflationary policies benefited the asset holders, the banks, and the top 10% of wage earners at the expense of everyone else.

  1. Blame Nixon for closing the gold window in 1972; that allowed Congressional deficit spending at will.
  2. Blame the Fed for insisting on 2% inflation in a technological price-deflationary world.
  3. Blame Congress for massive fiscal deficits every year.
  4. Blame fractional reserve lending for being the enabler of trillions of dollars worth of mortgage and other loans, constituting money borrowed into existence chasing rising asset prices.
  5. Blame the media and academics for parroting the ridiculous notion that there is a benefit to rising prices. In the real world, standards of living improve when goods are cheaper.

ORIGINAL SOURCE: How the Fed's Inflation Policies Crucify Workers in Pictures by Mike Mish Shedlock at The Maven on 2/19/18