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2016-10-09

Jiohn Mauldin is angry. By reducing the incomes of retirees and terrifying near-retirees, the Fed successfully reduced economic activity.

I must confess, the more I think about where the “monetary policy community” of academic elites has brought us, the angrier I get. It has been a long time since I have been this passionately upset about something. 

And not merely because the policies are stupid. If I got passionately upset about every stupid idea I come into contact with, I would soon require serious blood pressure medication. 

Having been intimately involved in the political process for almost 25 years in a prior life, I daily came into contact with stupid ideas and thought myself somewhat immune.

I would argue that the Great Recession was a result of a massive monetary policy error: keeping rates too low for too long, which, when coupled with lax or no regulation in the mortgage markets, resulted in a housing bubble and a crash, which bled over to global markets. 

This outcome should not have been a surprise to anyone. A number of us were writing as early as 2004–05 about the problems that were the primary triggers for the Great Recession.

I believe we are again suffering the effects of a massive monetary policy error. The error has already been committed, but we have just begun to endure the consequences. 

We are still living in a dream, but we’re nervous, much like we were in 2006. The Federal Reserve has repeated the mistakes of the last cycle. They have kept rates too low for too long, but this time they have outdone themselves, clinging desperately to the zero bound. 

In doing so they have financialized the economy and made it hypersensitive to interest rate moves.

John Mauldin 9 October 2016

US government debt is a safe haven the way Pearl Harbor was a safe haven in 1941.

About the Great Recession at IntCom


Asset price bubbles and Central Bank Policy


John Mauldin at Amazon





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