O.M.F.G. That’s all I can think to say.
In a nutshell, the Fed “prints” money by participating in the bond market. It buys Treasury bonds from other large financial institutions and pays for them by adding credits to the sellers’ accounts at the Federal Reserve (as opposed to transferring actual cash). Poof! New money.
I am not going to go through his entire worthless apologia for the Fed’s actions, but I do want to cover two points: first, his bass-ackward thought process regarding inflation, and second, the Fed’s targeting of stock prices to achieve its goals (and possibly for validation of its policies).
That is complete nonsense. Under a sound and sane monetary regime, we could actually have deflation and real economic growth at the same time. As James Grant of Grant’s Interest Rate Observer has noted in several articles over the years, that outcome has occurred many times over this country’s history. A 2% inflation rate ensures nothing except that if that is your target, you will almost certainly get more. In fact, we already do get more, since anyone with a brain knows the Consumer Price Index is a completely understates inflation, given the hedonics, substitution and other fiddles.
Bernanke moonlights at the Defense Department