Saturday, October 16, 2010

More Fed Officials Pile on Bernanke's Inflation Bandwagon

Reuters reports:
Two top Federal Reserve officials argued for further aggressive action by the central bank, with one saying the economy needs "much more" help and the other pointing to Japan's painful lessons.

With nearly one in ten in the U.S. labor force unable to find work and already very low inflation threatening to drop further, the U.S. central bank is expected to offer the economy more support at its next policy meeting on Nov. 2-3.

Most analysts expect the Fed will embark on a fresh round of Treasury purchases, over and above the $1.7 trillion in longer-term assets it has already bought.

"In my opinion, much more policy accommodation is appropriate today," Chicago Federal Reserve Bank President Charles Evans told a conference hosted by the Boston Fed, repeating an argument he made earlier this month.

Boston Fed President Eric Rosengren, speaking at the same event, said Japan's drawn-out battle with deflation shows prevention may be easier than the cure, and policymakers should respond aggressively before "pernicious" deflation takes hold.

"Insuring against the risk of deflation may be much cheaper than waiting until it has occurred and then trying to address it," said Rosengren, who has a darker view of the economic outlook than some of his colleagues at the central bank.

"A gradual response may not be as effective as a more active response to arrest deflationary pressures before they become embedded in thinking that can affect household and business spending," he said.
These Fed presidents have a stunning lack of knowledge about the business cycle. They are turning a blind eye to the roaring inflation at the commodity level and the fact that the dollar is collapsing in foreign exchange markets.

To institute an aggressive money printing campaign at the present time is the height of recklessness that could very well lead to hyperinflation in the United States.

1 comment:

  1. Concerns about unemployment and deflation are smokescreens. As the lender of last resort, the Fed will be monetizing U.S. Treasury debt for a long time. If they don't, they will be disbanded.