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Federal Reserve has already created bubbles

A recent Reuters article quoted President Obama as saying about the Federal Reserve: “They’re going to be making sure they are keeping an eye on inflation, that they’re not encouraging some of the bubbles that we’ve seen in our economy that have resulted in busts.”

This appears to be misinformed thinking as the Federal Reserve’s manipulated zero interest rate policy has, to many professionals’ thinking, already created “bubbles” in the bond and equity markets, in fiat currency creation, in greater debt levels than in history, in financial repression for savers and the thrift-conscious, and a nation of growing numbers of part-time workers unable to earn a living wage.

The U.S. dollar index has dipped below a critical 80 level, and when the magnitude of a new debt ceiling is finally reached, may decline faster and further. Many Asian nations no longer wish to hold additional debt from the United States. The rapid rise in the 10-year Treasury bond rate may be only temporarily on hold as the Federal Reserve refused to “taper” its purchases.

The premises of the president’s thinking have to be questioned strongly.

David R. Conners


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