Wednesday, August 19, 2009

Fed Borg, Thornton, Asks the Wrong Question…

Daniel L. Thornton, Vice President and Economic Adviser of the St. Louis Fed, has been so thoroughly assimilated that he has absolutely no idea what question to ask… as evidenced in this latest piece of Fed sponsored “research.”

The Conclusion from Mr. Thornton?
"A possible lesson from these events is that financial markets and the economy might be better off if, in future financial crises, the Fed first increases the supply of credit available to the market. Additional actions can be taken if there is evidence that quantitative easing alone is insufficient.

"Of course, this means that the Fed must be willing to promptly, albeit temporarily, abandon its funds rate target.

"The inflationary consequences of quantitative easing can be mitigated by informing the market that the increased monetary base will be reduced systematically at the first signs that the economy is improving and the financial market crisis is abating."

Tell you what, Mr. Thornton… next time you tackle a research paper, I would respectfully submit that you frame it around the following question:

“Would the elimination of the Fed allow the free markets to remove economic excesses before knuckleheaded policy makers decide to manipulate natural economic forces leading to the buildup of massive and unsustainable credit bubbles?”

Now THAT is an appropriate question to be asking. Guess I have yet to be fully assimilated like Mr. Blue Sky from the Fed…

ELO - Mr. Blue Sky:

PS – Your tax dollars pay his salary!