Misplaced or diabolical?

The ‘Financial Times’ cleverly exploits the protest of construction workers criticising the Federal Reserve for raising rates as a opening ruse in its long column on the Federal Reserve rate hike of 0.25% from 0.0% in December 2015. If the comments are any indication, most readers have seen through the FT trick. That is very heartening. The FT should be embarrassed if not ashamed. This comment by one Tim Young is well worth a read:

Let’s be honest about this.  The Fed’s credibility is not at stake here at all; arguably the opposite.  Credibility is about whether an individual or organisation can be expected to fulfil an advance commitment when to do so is costly to them.  To argue that the Fed’s present actions are damaging its credibility is like arguing that the fact that a glutton is sticking to a diet even after they have dipped below their weight target means that they are more likely to relapse and put weight back on – it is nonsense.

No, what this is all about is the never-ending subversion of all central banks by the financial, political and metropolitan establishment, who are desperate to sustain the present overvaluation of asset prices relative to consumption prices and incomes.  The financial industry likes inflated prices of assets, especially risky assets, because they make more money from trading and managing them; politicians like inflated prices of popular assets like houses and stocks, and bonds for the implied low cost borrowing for themselves, and the metropolitan establishment, including senior academics and media types, are comfortable with the present position of advantage being enjoyed by them and their progeny.  The left wingers calling for easing now and always are just useful idiots with misconceptions about creditors being rich people, whereas in fact really rich people hold most of their wealth in real assets like property and stock.

This unholy alliance began its subversion with the Fed, cheerleading Greenspan’s put and appointing Bernanke who had advertised his willingness to print money, captured the BoE with a succession of dovish appointments (leading to the present parade of “easing tarts” hinting about raising the inflation target, offering “overt monetary financing” or even abolishing currency, in a bid for career advancement via the MPC), seized upon German weakness to install an Italian at the ECB who has indeed proved as loose as Bild warned, and has further debauched the BoJ via Kuroda.  And so far, the plan is working out fine for the establishment in terms of sustained asset prices; sadly, however, with little or no improvement in the flow or quality of economic activity for the rest of us.

The saving grace of US monetary policy, while I deplore their politics generally, has been the influence of conservative politicians like Rick Perry, who made it difficult for Bernanke to be as easy as he might have liked.  Hence the Fed has emerged as the most likely central bank to err towards merely normal (never mind tight) monetary policy.  I hope the Fed ignores the siren calls from the establishment to change course, and makes a start towards unwinding the dangerous dislocation of asset prices and consumption prices / incomes that is perhaps the defining economic threat of our times.

The middle paragraph on how the elites have managed to place its apparatchiks in Europe, in Washington, D.C,  and in Tokyo is brilliant.

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4 thoughts on “Misplaced or diabolical?

  1. This has been the game for a while. The US ivy league academics and their progenies are everywhere. Why just point to the troubled advanced world. This is the case with emerging world as well.

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      1. I wanted to make the same point. The western world rules in terms of economic discourse no matter how wrong they are. They are the ones who say this is the game and play as per our rules. Some people protest saying the rules do not suit the local conditions but no one cares. Then the west guys go wrong. Instead of being humble and saying sorry for their actions, they say we told ya! And then they decide about the new rules as well.

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