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Fed Proposing Carter Era Inflationary Policy to Fix Economy

You’d think Paul Volcker was in the driver’s seat again.  While he’s no longer running the Fed, perhaps his leadership as the President’s chief economic advisor is giving him more of a voice than any of us want.

In his turn at the Fed, it was Volcker that pushed for the massive and crippling inflation that many of us remember having lived through.  Many in the Fed are considering giving that strategy another shot.

The Federal Reserve spent the past three decades getting inflation low and keeping it there. But as the U.S. economy struggles and flirts with the prospect of deflation, some central bank officials are publicly broaching a controversial idea: lifting inflation above the Fed’s informal target.

The rationale is that getting inflation up even temporarily would push “real” interest rates—nominal rates minus inflation—down, encouraging consumers and businesses to save less and to spend or invest more.[1]

Didn’t we learn anything from the move in the 80’s to end the inflationary mess?  Do they really think that consumers and businesses are holding on to their money because %1.36 interest on a CD is an amazing way to grow money?  From what planet do these ridiculous, Keynesian, demand-side retards come from?  The Fed is trying to fix a problem over which it has little power.  Consumers aren’t spending because they are worried about the jobs situation and business are holding on to extra cash because the regulatory and tax situation are still in-limbo.  Tack on Obamacare, looming EPA craziness, and an anti-business administration in Washington D.C. and you have the perfect recipe to paralyze an economy.

Don’t forget that the interest rates that the Fed controls would also push up lending rates on the second mortgages, lines of credit and credit cards that small businesses and consumers use to fund a portion of their spending.  If more money goes to paying the interest, less will go to actual spending.

The loonies in the Fed need to sit tight and we the people will help in November.  Getting a pro-business Congress that secures the Bush era tax cuts for the near future, slaps some limits on Obama’s czarist regulatory agencies, and puts real stimulative legislation in-play are the real solutions to our current economic situation.  Paying $5.00 for a loaf of bread will simply move the spending from non-essentials like T.V.s and travel to well ..bread.


[1] Wall Street Journal -“Fed Officials Mull Inflation as a Fix”http://online.wsj.com/article/SB10001424052748704689804575536391713801732.html?mod=WSJ_hpp_LEFTWhatsNewsCollection

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