From Barrons:
Lacy Hunt, the longtime Fed watcher at Hoisington Investment Management in Austin, Texas, sizes up monetary policy differently. “If the objectives of Quantitative Easing 2 (QE2) were to: a) raise interest rates; b) slow economic growth; c) encourage speculation; and d) eviscerate the standard of living of the average American family, then it has been enormously successful,” he wrote in the firm’s quarterly outlook.
Continuing:
Hunt disputes Bernanke’s assertion that the jump in commodity prices, painfully evident at the gasoline pump and the supermarket, was the product of geopolitical forces or strong growth abroad. Adding $600 billion to a banking system already awash in $1.1 trillion in excess reserves didn’t spur productive activity, just speculation.
Continuing:
Hunt traces the serial bubbles and busts back to the Long-Term Capital Management collapse in 1998. The Fed responded with extra liquidity, which wound up inflating the tech bubble. Once that burst and resulted in a mild recession, the Fed inflated the housing bubble. While Hunt deems the central bank’s response as the lender of last resort during the 2008 crisis to be proper, the Fed otherwise has had the economy on a “constant treadmill.”
With perhaps a little less literary spunk, my film made the treadmill point a while back…
