The U.S. Federal Reserve is losing its marbles, says Ambrose Evans-Pritchard, international business editor of London’s Daily Telegraph.
The economic policy mistakes it made were bad enough. Now one Fed economist wants to stop non-economists from commenting on the economy, “condemning economic bloggers as chronically stupid and a threat to public order,” Evans-Pritchard writes in the Telegraph.
“The current generation of economists have led the world into a catastrophic cul-de-sac. And if they think we are safely on the road to recovery, they still fail to understand what they did.”
Central banks, Evans-Pritchard says, were the “ultimate authors” of the credit crisis, setting the price of credit too low, which in turn forced banks to chase yield and engage in destructive behavior.
Moreover, the Fed’s quantitative easing, which increased U.S. debt to $2.4 trillion, has been poorly implemented as well as poorly thought out, with the Fed buying bonds from the banking system rather than going straight to the non-bank private sector.
“The inevitable result of this is a collapse of money velocity as banks allow their useless reserves to swell,” Evans-Pritchard says.
“And now the Fed tells us all to shut up. Fie to you sir.”
According to beforeitsnews.com, RBS credit chief Andrew Roberts recently warned clients that the Fed may soon undertake a “monster” quantitative easing of as much as $5 trillion.
“Investors basking in Wall Street’s V-shaped rally had assumed that this bizarre episode was over,” Roberts observes. “So did the Fed, which has been shutting liquidity spigots one by one.”
However, Roberts notes, the ECRI leading indicator continues to fall — pointing to contraction in the United States by the end of the year and dropping faster than at any time in the post-War era.
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