Yahoo Breakout: Bernanke Will Never Give Up

Alan Blinder

Nobody seems to like this new Fed policy.   Markets are way down.

What does it mean?  Let me take a stab at it.  With the Fed driving down interest rates in the future, it is making room for more Quantitative easing.  The Quantitative easing will go all along the yield curve.  Once the rates start to rise on the short term, that will make it easier and cheaper to buy it back later.

If this is permanent, and no more QE's , then it will be deflationary.  But that is not likely, in my opinion.  The government just can't permit that.

This is just rearranging the chairs on the Titanic.  The dollar doesn't get more valuable simply because of a shift in interest rates.

The presumption is the same faulty one we've witnessed all along: the government believes it can manage the economy.  Actually, it the government should just get out of the way.  Although the Fed is not the government, it is closely tied to the government.  The Fed relies upon the government for its power.  If they don't please the government, they will be called to account.

This is a bluff.  I don't see that anyone should buy bonds just because the government is doing it.