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The Fed Is Operating Without Rules

by Larry Kudlow, Breitbart:

So Fed chairman Ben Bernanke finally pulled the taper trigger this week. And it was the right thing to do.

Stocks soared. And even with some backing-and-forthing, gold, commodity indexes, and the dollar were basically stable. In other words, financial markets approved — especially stocks, where investors believe Bernanke is telling them the economy is strong enough to weather a pullback in Fed bond buying. Actually, if the Fed shaves $10 billion in bond purchases at each of its next seven meetings, QE3 will end in October 2014 — or perhaps sooner if the economy holds up.

In truth, this bond-buying business has outlived its usefulness. The Fed’s balance sheet under QE3 (and earlier QEs) ballooned to $4 trillion, with about $2.3 trillion in excess reserves. The best that can be said of all this Fed activism is that the central bank supplied — even over-supplied — enough liquidity to meet the voracious demand for money by banks, consumer households, and others who are still deleveraging and remembering the financial crash in 2008. The worst that can be said is that the Fed dug itself into a hole that will be hard to exit in the years ahead.

Read More @ Breitbart.com

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1 comment to The Fed Is Operating Without Rules

  • Frank Zak

    Did you know the 5th wave of the 5th wave down ends
    at $1100 gold for Elliot Wave people ?

    The 5th wave being he same price down as the 1st wave.

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