The Greatest Lie the Fed Ever Told
Public life bumbles along under a combination of false pretenses and self-imposed delusions.
At the start of last week, it was widely reported that US central bankers had gone as far as they were willing to go. There were voices in the Fed, said the news, urging caution. There would be no further monetary stimulus measures, said the commentators.
Investors grew cautious.
But by the end of the week, they were rolling the dice again. The Fed was working hard to fight the impression that it had either lost its nerve or recovered its senses. From The New York Times:
The Federal Reserve said Wednesday that its economic stimulus campaign would press forward at the same pace it has maintained since December, putting to rest for now any suggestion that it was leaning toward doing less.
The Fed emphasized that it was ready to increase or decrease its efforts to spur growth and reduce unemployment as necessary, a more balanced position than it took earlier in the year, reflecting the reality that a strong winter has once again yielded to a disappointing spring.
It was the first time that the Fed had explicitly mentioned the possibility of doing more in a policy statement, although officials, including the Fed’s chairman, Ben S. Bernanke, have made the point repeatedly in public remarks.
With the wind of the Fed at their backs, investors put out full sail. On Friday, they were skimming along nicely, riding high on a tide of “EZ” money. “Don’t fight the Fed,” said the analysts. The Fed is pumping… stocks are going to rise.
Of course, it’s not that simple. Zimbabwe pumped. Stocks rose… for a while. But ultimately, it takes more than cheap money to make businesses more valuable. And too much cheap money is contagious; stocks become cheap too.
The FED lies? Who would have thought that since day one the FED has spewed only ONE lie …. interrupted by an uncounted series of catching their breath ….
To quote Lily Tomlin’s character Edith Ann … “AND THAT’S THE TRUTH!”
Colonel Robert F. Cunningham,
Albuquerque