The Fed’s ‘crystal meth’ monetary policy
A classic from David Goldman:
The crystal-meth monetary policy at the Fed makes everyone feel better, until they donât. The nonstop rise in the price of dollar hedges tells us that it canât last forever. Large balance sheets attached to the Fedâs money pump can show profits, and the price of spread assets (as PIMCOâs Bill Gross keeps emphasizing) is stupid rich. But at the capillary level, through, the economy is dying and gangrene is setting in. … It isnât just the 17.5% broad-measure unemployment number that we should worry about, but the massacre of smaller businesses, who are concentrated in the most vulnerable sectors: real estate, construction, and retail. Retail sales may get a temporary shot in the arm from cash for clunkers, and a combination of tax credits and (de facto) subsidized mortgage rates may hold up the bottom of the housing market forÂ a short time. But todayâs data show how fragile these matters are.