Five Ft. Three

“A society that puts equality before freedom will get neither. A society that puts freedom before equality will get a high degree of both.” ― Milton Friedman

Where are the checks and balances?

on March 22, 2009

We hear about the Federal Reserve when they raise and lower interest rates so as to encourage lending during economic downturns. What we don’t usually hear about is when they do drastic measures such as buying up Treasury debt to stabilize the economy. But that is exactly what they did last week, with hardly any mention in the news (we were all talking about those AIG bonuses and about Obama being on Leno). And the Fed can do this with no vote needed, no need for approval from anyone, no discussion whatsoever.

In essense, what it means they are going to print up a hell of a lot on new money to buy Treasury bonds. And anyone with basic ecomonic sense knows that when more dollars are chasing the same goods, prices will go up (inflation). But the risk with the hugeness of the dollars being printed at this time is that hyperinflation is at risk. Our dollar is going to be worth less (not worthless, hopefully, but on that path). And there is no guarantee that an economic depression will be averted by their actions. My guess is that it will not, and this is why. Congress is the overseer of the Fed. And right now, our Congress has quite a tendency to want to spend money, and lots of it. So, they will likely want to see those printing presses give them more money to spend.

I sincerely hope I am wrong, but I foresee inflation far worse than the 1970s. Which during a depression will be very ugly.

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