Incompetence is the Charitable Explanation of The Federal Reserve Board’s Behavior
If they are wrong about there being no damaging consequences from the quantitative easing, they could ignite a 1970’s-type inflation, or worse.
By Fred N. Sauer at American Thinker
The academic name of this is quantitative easing. For working people, it is called printing money. This activity in lesser nations always results in inflation. If you need a definition of inflation, it is the most destructive tax that ever existed. It destroys the value of your labor and the value of everything you own that is denominated in dollars. And as income shrinks relative to selling prices, you get poorer and poorer. Then economic activity starts to decline just as it has in lesser nations.
But, we don’t have to worry about this, because Ms. Yellen is on the job: “Recent increases in prices of oil, grain and other commodities are ‘unlikely to have persistent effects on consumer inflation’ … ”
So in 2011 to date, we have extraordinary upward price pressure in Food, Clothing, and Fuel, which represent about 21% of personal consumption expenditures.
Our Ms. Yellen would only say that “…the key…is that the households and businesses don’t expect inflation to take off in the long run.”
You don’t have to be a genius or even a very practical person to process all this information and reasonably conclude that current and emergent inflation are a real problem.
So, in the face of this torrent of information about inflation that the world media is reporting, the Federal Reserve Governors got it exactly wrong.
Instead of making a small hedge against actual and incipient inflation, the Fed will continue to make a huge bet against deflation, which no one sees as a threat. A rational and prudent person would recognize the risk of inflation, pursue a policy hedging against it by not printing money, and raise interest rates.
This is bizarre! But, perhaps they are just too beholden to some socialist ideology about our economy. For as Lenin said, “[t]he way to crush the bourgeoisie is to grind them between the millstones of taxation and inflation.”
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