Tuesday, August 9, 2011

What can the FED actually do?

An interesting article this morning by Stephan Gandell on the Time site.

The problem is that four Augusts after it first acted to calm the markets in the early days of the financial crisis, the Fed is in a very different position. The Fed has faced a bruising year of criticism for the steps it has already taken to stabilize the economy. And short-term interest rates - which are the ones the Fed directly controls - are already at zero. Still, the Fed has some options."

Read more: http://curiouscapitalist.blogs.time.com/2011/08/09/stock-market-plunge-can-the-fed-do-anything/#ixzz1UWwEcH5E

The FED's options are limited, in responding to our ongoing economic disaster. They can't lower interest rates below zero... so that well has gone dry. They can pour money into the economy, but that is not a panacea. Cash dumps light rockets under inflation, and the population grows poorer with every point of increase. Our money simply doesn't buy as much. In that way, inflation fueled by FED cash dumping is a huge invisible tax.... and the American people simply can't afford more taxes.

No comments: