This is deeply disconcerting. I feel like our so-called economic leaders are throwing darts with a blindfold on, believing that they’ll somehow hit the bullseye.
- Bush has virtually abdicated any responsibility or leadership ever since September.
- Secretary Paulson has been all over the map with no coherent message or plan in sight.
- Fed Chairman Bernanke is printing money like we’re some sort of banana republic.
Will Obama follow these guys’ leads? I certainly hope not. But the fact that he has not addressed the issue of printing money for banks to hoard has me worried. I get chills when I read this:
All of the new tools [the Federal Reserve is employing] amount to printing money in vast new quantities, and the Fed has already started the process. Since September, the Fed’s balance sheet has ballooned from about $900 billion to more than $2 trillion as the central bank has created new money and lent it out through all its new programs. As soon as the Fed completes its plans to buy up mortgage-backed debt and consumer debt, the balance sheet will be up to about $3 trillion.
“At some point, and without knowing the timing, the Fed is going to have to destroy all that money it is creating,” said Alan Blinder, a professor of economics at Princeton and a former vice chairman of the Federal Reserve, said the central bank. “Right now, the crisis is created by the huge demand by banks for hoarding cash. The Fed is providing cash, and the banks want to hoard it. When things start returning to normal, the banks will want to start lending it out. If that much money is left in the monetary base, it would be extremely inflationary.”