After writing my Money and Markets article yesterday, I saw these news briefs from Reuters:
- The European Central Bank’s Ewald Nowotny sees low inflation for some time. He said stagflation, not inflation, is the danger for the euro zone.
- The ECB’s Joerg Asmussen feels caution is needed and would not rule out negative interest rates.
- Japan economic minister Akira Amari said Abenomics isn’t aimed at manipulating the yen, but to pull Japan out of deflation and make the country an engine of global growth.
In other words: The ECB is going to be in play for a while, and don’t blame Japan if the yen loses value — they’re not doing it on purpose. All hail the coordinated effort.
Meanwhile, I caught an interesting item on Zerohedge.com:
Andrew Huszar managed the Federal Reserve’s $1.25 trillion agency mortgage-backed security-purchase program in 2009-2010. He wrote an article, originally published in The Wall Street Journal, apologizing to America for being there on the ground floor when the first round of quantitative easing (QE) was launched.
His comments aren’t surprising to anyone who’s the least bit skeptical of the Fed’s extraordinary monetary policy. But they seem to carry some added gravitas because of Huszar’s first-hand experience. His comments serve to remind us of some very important things:
1. Main Street has been helped very little by QE.
2. Wall Street and financial institutions have flourished from a windfall of QE subsidies.
3. The Fed continues to enable a dysfunctional U.S. fiscal policy.
4. Extraordinary monetary policy is now too big to fail.
There is no end in sight to the insanity. The Federal Reserve and its counterparts cannot stop what they’ve started. If they do, they risk pulling the rug out from under a financial system they’ve so painfully fought to reorder in their own likeness.
Since everyone sees “low inflation for some time,” the only way extraordinary monetary policy stops is if social unrest erupts. The inequalities created in a highly ordered, financialized economy cannot improve if capital continues to flow to the holders of capital at the expense of the laborers. Until enough people become fed up with the Fed, the game will go on under the guise of economic necessity.