Thursday, 18 August 2011

Ben Bernanke: dangerous moral hazard

The FED under its Chairman Ben Bernanke is engaging in a very dangerous "game" trying to artificially prop up the share market (and bond market for that matter), as predicted by observers like Dr. Marc Faber. It is also doing everything opposite the advice that the IMF gave to the Asian countries in the 1997/98 crisis, rather hypocritical to say the least.

Two FOMC members voted against the proposals and have openly spoken out against the recent decision to keep the interest rates artificially low for an extended time:

"Two Federal Reserve policy makers said the central bank’s commitment to keep its benchmark rate near zero for two years may create a misperception it’s aimed at boosting stocks, which contributed to their opposition. Philadelphia Fed President Charles Plosser said in an interview yesterday that taking action after stocks tumbled “signaled that we are in the business of supporting the stock market.” Richard Fisher, the Dallas Fed chief, said in a speech that the Fed “should never enact such asymmetric policies to protect stock market traders and investors.” Both also said the policy won’t help spur growth. Plosser, Fisher and Narayana Kocherlakota of Minneapolis voted against last week’s Fed decision to hold the benchmark interest rate at a record low until at least mid-2013, the most dissent in almost 19 years. The move followed an 18 percent drop in the Standard & Poor’s 500 Index of stocks from the end of April through Aug. 8.
It was inappropriate policy at an inappropriate time,”Plosser said yesterday in a radio interview in New York on“Bloomberg Surveillance” with Tom Keene and Ken Prewitt. Policy makers will probably need to raise rates before 2013 and should have waited to see how the economy performed, he said."

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