Richard Foster, President of the Federal Reserve Bank of Dallas, said:
With each program we undertake to venture further in that direction (in the direction of using monetary policy as stimulus), we are sailing deeper into uncharted waters.
We are blessed at the Fed with sophisticated econometric models and superb analysts. We can easily conjure up plausible theories as to what we will do when it comes to our next tack or eventually reversing course.
The truth, however, is that nobody on the committee, nor on our staffs at the Board of Governors and the 12 Banks, really knows what is holding back the economy.
What an amazing admission! This comes close to admitting that the King is naked after all! The mantle of credibility is slipping badly when one of its own admits that the Fed hasn’t a clue.
Austin Hill then asks another pertinent question:
[Our economy] is already flush with $1.6 trillion in excess private bank reserves owned by the banking sector and held by the 12 Federal Reserve Banks. Trillions more are sitting on the sidelines in corporate coffers. On top of all that, a significant amount of underemployed cash—or fuel for investment—is burning a hole in the pockets of money market funds and other non-depository financial operators.
This begs the question: Why would the Fed provision to shovel billions in additional liquidity into the economy’s boiler when so much is presently lying fallow?
Let me guess: because that’s all they know!
And the impact of continuing, and accelerating, a program that has been proven to be a failure? Here’s a peek at the Federal Reserve’s own chart of the massive “fallow trillions” just waiting…and waiting…to enter the economy and cause the explosion in prices so many are expecting.
When these trillions hit the street, I’m hopeful citizens will remember who’s responsible.