Fed : Please Tell Us The Whole Truth and Nothing But The Truth.
The unemployment rate has been the Fed’s pet peeve for QE3 so much that they are willing to keep buying up to USD 85 billion a month in US treasuries and agencies to target an unemployment rate of 6.5% with recent whispers that the target may be lowered.
For the layman, it is hard to visualise a link between buying bonds and creating jobs when all we can see are higher stock markets and richer billionaires. http://www.marketwatch.com/story/10-things-billionaires-wont-tell-you-2013-11-15?link=sfmw
Why is the Fed so convinced they are right ? Especially when they are trying an experimental monetary policy regime that Japan and Europe appear to have caught on ?
Why do they defy the growing host of critics, most of which are prominent names in the markets ?
We are all taught the first lesson, some time in each of our lives, that there is no free lunch. So what is the catch in this economics lesson ?
Bernanke and now Yellen is telling the world that they will go on with the 85 billion dollar monetisation each month and that it will create jobs and raise inflation. Yet so far, they have not told the world the risks or the pitfalls or their policy.
Surely, they have a duty of care to the audience whom they are beholden to, for the Federal Reserve’s duty is to the American public, to tell the whole truth and nothing but the truth, so help them God ?
I oft get blind sided when I am overwhelmed, and charge on bullheadedly because I cannot cope with multi faceted problems that come along with just too much data for a single human being to understand. Thus we draw the boundaries for information processing and ignore the rest that falls outside the scope.
It is easy for the Fed to draw boundaries based on just the motive for their existence.
1. Maximum employment,
2. Stable prices, and
3. Moderate long-term interest rates
“Its duties have expanded over the years, and today, according to official Federal Reserve documentation, include conducting the nation’s monetary policy, supervising and regulating banking institutions, maintaining the stability of the financial system and providing financial services to depository institutions, the U.S. government, and foreign official institutions. The Fed also conducts research into the economy and releases numerous publications, such as the Beige Book.” http://en.wikipedia.org/wiki/Federal_Reserve_System
Nothing in those duties demand that the Fed has to responsible for widening income gaps and quality of jobs created or even asset bubbles in the stock market.
And if they fail in their objective, the escape route is simple – to throw their hands up and give up and join a private equity firm like former US Treasury Secretary Timothy Geithner is cleverly doing. http://www.reuters.com/article/2013/11/16/us-usa-fed-geithner-idUSBRE9AF02A20131116?feedType=RSS&feedName=businessNews
Greenspan has come out to say he was wrong many a time during his 10 year tenure as Fed chair. All too easy years after the events. http://online.wsj.com/news/articles/SB10001424052702304410204579139900796324772
The Fed has reached a god like status in markets these days with a single statement swaying sentiments and moving markets in magnitudes never seen before.
Isn’t it about time they laid out the cards and not just the positives of their actions ? And let at least the American public and the world know where the risks of their actions lie as well ?