David Stockman On The Fed’s Path Of Destruction
by Tyler Durden
David Stockman concludes his two part series on Crony Capitalism (part one here) with this scathing take down of the Federal Reserve. Hopefully this is nothing new to anyone at this point…
First posted in Marketwatch.
The destructive result of the Federal Reserve’s earlier housing and consumer credit bubble became the excuse for embracing a destructive zero interest rate policy which is self-evidently fueling even more destruction.
This destruction is namely, the exploitation of middle class savers; the current severe food and energy squeeze on lower income households; the illusion in Washington that Uncle Sam can comfortably manage $14 trillion in debt because the interest carry is close enough to zero for government purposes; and the next round of bursting bubbles building up among the risk asset classes.
Moreover, the Fed soldiers on with its serial bubble-making, even though it is evident that the hallowed doctrines of modern monetary theory and the inherently dubious math of Taylor rules have failed completely.
Indeed, the evidence that the Fed no longer has any clue about the transmission pathways which connect the base money it is emitting with reckless abandon (e.g. Federal Reserve credit) to the millions of everyday pricing, hiring, investing and financing outcomes on Main Street sits right on its own balance sheet. Specifically, if the Fed actually knew how to thread the needle to the real economy with printing press money it wouldn’t have needed to manufacture $1 trillion in excess bank reserves — indolent entries on its own books for which it is now paying interest.