Thursday, July 18, 2013

Bernanke Is Flexible on How Much to Hamper the Market

Ben Bernanke yesterday told Congress that he had no set time table about when to increase or decrease its bond purchases. What that means is that the FED remains untethered by sound economics as it seeks to promote economic recovery. Of course, Bernanke is not completely  flexible. He would never, for example, argue for a gold standard or for ceasing and desisting open market operations. On the contrary, given the FED deflation phobia, Bernanke's statement implies more of the same: an inflated monetary base, money pumping, and the audacious hope that massive excess reserves can be unwound without making price inflation worse or interest rates seriously increase.

What needs to happen, of course, is what I told the Sound Money Institute: Drastically cut government spending, reduce regulation, including Obamacare, stop subsidizing financial  institutions, stop inflating, and allow market participants to sort out which assets are productive and which are not, so they can be directed toward their most valued use, as determined by people in society.

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