The Fed's Misguided Policies: Musings

With the Fed engaging in financial repression (maybe that should be oppression, the only role of the Fed is to steal from savers…) there are many corporate bonds being issued at low yields, some of which  are at lower yields than losses that we experience during crises for the ratings class.  Should this not be a warning sign?  Yes, it should.

The Fed is creating another bubble.  Note the failure of the last bubble they engineered — the housing mortgage bubble.  They are smart, oh so smart, but with little true knowledge of how the world works.  We would be better of without the Fed.  Please unemploy a bunch of Ph.D. economists who can create very clever models of the economy that bear no resemblance to the real economy.  Please eliminate a bunch of pseudo-intellectuals who think they can control the economy.

Please eliminate a bunch of sorcerers apprentices who think they understand how to stimulate the world, and replace them with a bunch of humble people who know that they do not know, and maybe, a few that know that they can’t really stimulate, so give up.

The low interest rates that the Fed supports for high quality bonds indirectly attempts to overleverage the corporate sector in the same way that they overlevered the consumers through housing 2003-2007.

We would be a lot better off without as much government interference.  We grew much faster when the government did not try to control the economy as a whole.  Please point to successes in government macroeconomic management.  You will find none.

Interest rates are too low now, and are building up a new bubble in corporate debt.  Don’t worry in the short run, the corporate sector is strong.  But what if this continues for a while?  The one remaining sector of strength will be compromised.

Our policies in the US stink… it is only a matter of time before they hurt us badly, whether through higher taxes, inflation, or default.

By David Merkel, CFA of Aleph Blog