11.09.2007

Fleckenstein on the Fed

Fleck on the disaster that is the Federal Reserve:
Why in the hell was the central bank easing the federal funds rate with (1) the dollar at a new low, (2) oil at $90, (3) gold at $800, (4) virtually every commodity on the planet going wild and (5), despite government statistics to the contrary, inflation raging?

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The Fed's policy is to print money, print money and print more money. That's because of what then-Fed chief Alan Greenspan did for nearly 20 years. He bailed out every problem that came along, so we never had a small forest fire. Now we're getting set to have a giant forest fire.

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At least somebody at the Fed had indicated to [WSJ reporter Greg] Ip that he was concerned about how the stock market would respond to the Federal Open Market Committee decision, which indicates how much the Fed is in the back pocket of speculators.

Running the Fed by trying to pick the right interest rate was never a good idea, but that's what Greenspan did and what Bernanke does now. An even worse way to run the Fed is to be 100% on the applause-meter standard, which seems to be the path we're going down.

Just to show you what a pathetic joke the Federal Reserve is, last week the Mexican central bank raised interest rates from 7.25% to 7.5% -- and the peso has been far stronger than the dollar lately.

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