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 donâ€™t. The nonstop rise in the price of dollar hedges tells us that it canâ€™t last forever. Large balance sheets attached to the Fedâ€™s money pump can show profits, and the price of spread assets (as PIMCOâ€™s Bill Gross keeps emphasizing) is stupid rich. But at the capillary level, through, the economy is dying and gangrene is setting in. … It isnâ€™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 forÂ a short time. But todayâ€™s data show how fragile these matters are.