You have to love it: The just released Fed minutes from the September 22-23 meeting are looking unbelievably dovish. Some Fed members were reportedly even open to INCREASING the size of MBS purchases. This from a Fed whose quantitative easing policies are driving the dollar into the crapper. Seriously? Meanwhile, the Fed minutes note that “with the significant under-utilization of resources expected to persist through 2011, the staff forecast core inflation to slow somewhat further over the next two years from the pace of the first half of 2009.”
In other words, if you think this Fed is going to tighten rates anytime soon, you have to be nuts!
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Inflation slowing? Have they been to the store lately? Have they been watching the bubble forming in the stock market? They need to use a meaningful gauge of inflation, not the bogus method they use now. Have they been watching the creative accounting being used by the banks again. Shades of 2002 - 2004. Feel like I’m living Groundhog Day. I’m going to say it again. The Fed needs to be abolished.
Mike Larson writes, “The next bust will only occur when…..a concerted effort to bolster the greenback by virtually every central bank in the world.”
Mike bolster the greenback? I’m confused. How will buying the dollar by central banks in the world cause a bursting of the bubble?
Thanks. –Michael
Mike Larson Reply:
October 16th, 2009 at 10:47 AM
The asset markets are floating on a sea of easy money. Low interest rates and a falling dollar are helping create that sea. If global central banks were to coordinate a massive intervention in support of the dollar and/or the Fed were to start raising rates and curtail its “quantitative easing” activities, that would lead to a sharp decline in asset values because the easy money firehose would be turned off (or at least, the flow would be reduced). But central banks are nowhere near that kind of policy, especially here in the U.S. The U.S. Fed is more in line with the ‘Bill & Ted’s Excellent Adventure’ theory of monetary policy (i.e. “Party on Dudes!”)