Warning: More inflation ahead
Former St. Louis Fed president William Poole just lifted the veil over the Federal Reserve’s machinations, at least a bit. Consider this, from an interview in one of Germany’s major papers:
In historical perspective inflation is a means to diminish the stress felt by debtors. The policy of the US central bank is construed to create inflation to alleviate that stress. Its monetary policy was, is, and will be “lax” until the economic situation, and the situation of financial firms, will be improved. All in all this will entail an inflationary tendency, even if the latter will entail a bundle of new problems in another three or four more years.
Guess that means more helicopter drops are on the way. Not surprising, considering the tacit understanding within Washington that finance is the one sector of the economy that will never be allowed to implode. That’s been on my mind reading Kevin Phillips’s Bad Money, a new volume that cites the late Kurt Richebacher among others in chronicling the rise of the financial sector’s dominance of U.S. GDP (to say nothing of the S&P 500).
Bottom line: Manufacturing can be hollowed out, and dot-coms with no earnings can go by the boards, but the money-shufflers will always get bailed out. Always.
Hat tip LRC for the translation.