James Pethokoukis

Politics and policy from inside Washington

The Fed’s ‘crystal meth’ monetary policy

November 20, 2009

A classic from David Goldman:

The crystal-meth monetary policy at the Fed makes everyone feel better, until they don’t. The nonstop rise in the price of dollar hedges tells us that it can’t last forever. Large balance sheets attached to the Fed’s money pump can show profits, and the price of spread assets (as PIMCO’s Bill Gross keeps emphasizing) is stupid rich. But at the capillary level, through, the economy is dying and gangrene is setting in. … It isn’t 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 for a short time. But today’s data show how fragile these matters are.

Comments

Everyone (almost) seems to be rather optimistic, though.Compare:http://www.gold-eagle.com  /editorials_01/seymour062001.html

Posted by yr | Report as abusive
 

Monetary policy is one of the tools that a national Government uses to influence its economy. It is mainly used to low unemployment, low inflation, economic growth, and a balance of external payments.
http://www.mikeastrachan.com/

Posted by Nikkilarsson | Report as abusive
 

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