At present, however, the governors of the Fed are creating massive distortions in the financial markets with little hope of improving real economic growth or employment. There is no question that the Fed has the ability to affect the supply of base money, and can affect the level of long-term interest rates given a sufficient volume of intervention. The real issue is that neither of these factors are currently imposing a binding constraint on economic growth, so there is no benefit in relaxing them further. The Fed is pushing on a string....
Quantitative easing promises to have little effect except to provoke commodity hoarding, a decline in bond yields to levels that reflect nothing but risk premiums for maturity risk, and an expansion in stock valuations to levels that have rarely been sustained for long... The Fed is not helping the economy - it is encouraging a bubble in risky assets, and an increasingly unstable one at that. The Fed has now placed itself in the position where small changes in its announced policy could have disastrous effects on a whole range of financial markets. This is not sound economic thinking but misguided tinkering
Night of the living Fed. Jeremy Grantham, GMO Quarterly Letter.
The urban legend of the bond bubble. Scott Minerd, Guggenheim Investment Mgmt.
Canada has options for FX tensions if needed -- Carney. Reuters.
"There are heightened tensions in currency markets. Together, we -- the Bank of Canada, the government of Canada -- maintain considerable options to control the situation if that is necessary," Carney said. "What is important is that we have to observe persistent strength in the Canadian dollar, which has the potential to seriously influence Canadian economic growth ... we have options in those circumstances," he said.
Also
Carney said there was a limited role for the central bank in targeting housing prices, suggesting better tools would come from the government, such as tougher rules for mortgage insurance terms introduced earlier this year.
other fare:
Barack Obama: The oligarchs' president. Charles Ferguson, Salon.
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