January 30, 2016

EVERY NEW FED LEADER HAS TO PROVE THEIR INFLATION-HAWK BONA FIDES...

The Fed Is Freaked Out About the Financial Markets (Lawrence Kudlow, January 30, 2016, RCP)

Early in the new year, on Sunday, Jan. 3, Federal Reserve Vice Chairman Stanley Fischer delivered a hawkish speech to the American Economic Association. Completely misreading the economy, which is woefully weak while inflation is virtually nil, Fischer strongly hinted that the Fed would be raising its target rate by a quarter of a percent every quarter for the next three years. [...]

This past week, the Fed retreated in its Federal Open Market Committee policy statement. For the first time in a long while, it didn't bother with a risk assessment between inflation and employment. The whole statement had a much softer tone. It reminded me of the prevent defense of Bill Parcells' old New York Giants.

Putting it more starkly, I'd say the Fed is completely freaked out by financial markets that are turning against it.

...and all three of them have been disastrous--Greenspan's '87 crash, Bernanke's in '08 and now Yellen's.  When you raise rates into the teeth of deflation you can't expect anything different.  They need to drop rates below what they were at this last raise.  They were already usurious.

Posted by at January 30, 2016 8:39 AM

  

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