Paul Volcker is a former Federal Reserve Chairman. When Mr. Volcker was head of the Fed, there was still a free market and unfortunately for him, the so-called bond vigilantes were willing to stand up to the FOMC. When they sold bonds, yields rose quickly and Paul Volcker got the blame.
Now, the bond vigilantes leave the former USA alone, because it has morphed into the centrally planned viper pit of the Too Big to Fail banks of Fraud Street that we know today. In other words and other spending, we’re now the USSA. Instead, bond vigilantes have been bouncing from one insolvent European nation to another.
What does the former Fed Chairman say about today’s market manipulations? In a short phrase: “Good luck in that.” http://www.bloomberg.com/news/2013-05-29/volcker-cautions-federal-reserve-may-fall-short-.html
In the link above I was happy to read that Mr. Volcker agrees with me that the Fed’s dual mandate is a joke. It doesn’t work. He may not go as far as I do in saying that a dual mandate is a political directive that allows the Fed to do whatever it wants – whenever it wants – with the political cover of “well, we have a dual mandate…” but it’s close.
“It’s fashionable to talk about a dual mandate, that policy should somehow be directed toward two objectives, of price stability and full employment,” Volcker told the Economic Club of New York. “Fashionable or not, I find that mandate both operationally confusing and ultimately illusory.”
I agree.
“Asked to do too much, for instance to accommodate misguided fiscal policies, to deal with structural imbalances, to square continuously the hypothetical circles of stability, growth and full employment, then it will inevitably fall short,” Volcker said. Those efforts cause it to lose “sight of its basic responsibility for price stability, a matter that is within the range of its influence.”
Chairman MaoNanke, however, cares neither for basic price stability nor for someone else’s thoughts of what the range of the Fed’s influence should be. After all, he *IS* the Chairman. He controls the world.
“The Federal Reserve, any central bank, should not be asked to do too much to undertake responsibilities that it cannot responsibly meet with its appropriately limited powers,” Volcker said. He said a central bank’s basic responsibility is for a “stable currency.”
“Credibility is an enormous asset,” Volcker said. “Once earned, it must not be frittered away by yielding to the notion that a little inflation right now is a good a thing, a good thing to release animal spirits and to pep up investment.”
“The implicit assumption behind that siren call must be that the inflation rate can be manipulated to reach economic objectives,” according to Volcker. “Up today, maybe a little more tomorrow and then pulled back on command. Good luck in that. All experience demonstrates that inflation, when fairly and deliberately started, is hard to control and reverse.”
Unfortunately the USSA, with the rest of the world, have embraced the silliness of the child-like Keynesian economists that refuse to believe that central planning has limits. After all, they always want more spending whether it comes from Congress or the Fed.
A young man like Paul Volcker wouldn’t even get an interview with the Fed today. The thoughts expressed above would be too radical because they are too “free market” based, and today we just want financial socialism.
Trade well and follow the trend, not the perma-bull OR perma-bear “experts.”
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Keep a civil tongue.