“It’s time for the Federal Reserve to stop reducing the federal funds rate, because the likely benefit is small compared to the potential damage.” So speaketh Martin Feldstein, president and CEO of the National Bureau of Economic Research. (The NBER is the organization that officially declares when the US economy is in a recession.)
In an op-ed piece in today’s Wall Street Journal (“Enough With the Interest Rate Cuts”), the Harvard professor states that lowering the fed funds rate from its current 2.25% would increase inflation. Back in December, Feldstein was on CNBC demanding the Fed continue cutting rates. Just like his organization’s recession forecasting, Feldstein has arrived late to the realization that low interest rates are hurting rather than helping consumers. I have written since last August that
Saturn in Virgo (2007-2010) would bring deflated supplies and inflated prices. I had also written long before Feldstein’s epiphany that borrowers are not benefiting from lower interest rates.
Feldstein fails to mention that the Federal Reserve is keeping rates low to create a wider yield spread to help the banks. Beyond that, we know that Bernanke is obsessed with the Great Depression, and seems determined to create another one. He believes that the Fed was too tight with monetary policy then, so taking the opposite stance now should surely prevent economic collapse. If Bernanke understood planetary cycles, he would only have to go back one Saturn cycle ago to the late 1970s to see history repeating itself. As a Jupiter ruled Sagittarian, Bernanke is obsessed with growth and expansion. He thinks he can focus on fostering growth first and worry about inflation later. With his Mercury (thoughts) and Venus (values) also in Sagittarius, he is optimistic that economic conditions will improve in the second half of the year. Bernanke blames investor speculation for high commodity prices and their resulting inflation. He forecasts that once the bubble bursts, inflation will diminish. His mind is simply incapable of correlating that low interest rates fuel inflation by decreasing the value of the dollar, pushing up the cost of food and energy worldwide. This is why you must have a Federal Reserve comprised of members who are not missing the common sense earth element in their horoscopes. It doesn’t matter what your studies and data models show that you pour over in your ivory tower when people are struggling to survive.
BREAKING NEWS! In the unfortunate honor of the March Producer Price Index up 6.9% year over year, with “core” (ex-everything) up 2.7% year over year, here’s a linkfest of Wall Street Weather posts I’ve written about relating to inflation: Wheat Goes Wild, Deadly Inflation, Inflationization, Jim Rogers Speaks His Mind, Bubbles Beyond the Bathtub, Inflation is like Dandelions, The Commodities Craze, No Core Inflation for the Post Office, Larry Kudlow, Inflation Fighter, Fund Managers Say Stagflation is Here, A Prudent Bear is Better Than an Over-Fed Bull, The Fed’s Future, The Bank vs. Bernanke, Federal Reserve lowers rates, determined to destroy U.S. economy, The Fed Under Fire.