03/27/2015 - Financial Repression Is Creating Financial Bubbles
“This morning’s Wall Street Journal expressed it about as plaintively as it comes. In a word, the monetary politburo is waiting for zero interest rates, massive debt monetization and its wealth effects promises and “puts” to goose the macros: ‘The central bank has kept rates near zero since the recession to spur hiring, investment and spending.’ .. Does it really take purportedly intelligent people six years to see that the macros are not responding? Better still, isn’t it time for the Fed to explain the exact channel by which its interest rate pegging and forward guidance is supposed to be transmitted to the main street economy? After all, if these channels are blocked or ineffective then its flood of liquidity never leaves the canyons of Wall Street. In that event, the central bank actually functions as a financial doomsday machine, inflating the next financial bubble until it bursts. Then, apparently, its job is to rinse and repeat .. How in the world, it might be asked, is it possible that the chief beneficiary of the financial repression policies of the Fed is the very most affluent segment of society? That is a salient question—-but don’t bother to ask the liberal Keynesians who run the Fed. They do no even have a clue that it’s happening.”
– David Stockman
