Neither rain, nor sleet, nor snow, nor economic recovery, nor rising gold and commodities, nor $2.2 trillion in money-creation will stop the Federal Reserve from remaining ultra-easy.
This is what I call being militantly dovish.
That’s how I’m reading yesterday’s FOMC announcement.
Here’s my basic criticism of Bernanke & Co.: The emergency is over, folks. The recession ended last June. An emergency zero interest rate is no longer necessary.
Now, I know the Fed believes it can drain cash and raise rates when the exact right time comes to stop inflation. But as Milton Friedman taught us years ago, monetary lags are long and variable. Turning an ocean liner around takes time. In other words, it might require what amounts to an “inside straight” for the Fed to pull off this monetary miracle.
The Fed is still targeting unemployment — a lagging indicator — rather than gold and commodity prices, which are leading inflation indicators. As a result, the central bank did not indicate even a hint of restraint at its Tuesday meeting.
Bravo to Kansas City Fed head Tom Hoenig for his dissent — his second in a row. But unfortunately, the extended-period language he objects to is still there.
After all, why should the government be worried about unemployment? Larry Kudlow's got a job, after all. But seriously, has Kudlow been checking the housing and CRE markets lately? Greece and the Euro? China? Even with all this free money, the banks aren't loaning it out to people. Once again, Kudlow's spouting the Republican Neo-Hoover line: cut off the recovery to stop inflation!
Producer prices were down another 0.6% last month. Seems like the only inflation we've got around here is in health insurance premiums.
But is all seriousness, do you think the recession ended last June? That's good news for the Dems if Kudlow's right, it means Obama's fixed the economy and that the Republicans don't have an issue in November.
You know, unless you think Kudlow's an idiot or something...
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