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Minyan Mailbag: The Fed's Ideology

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In the meantime the music continues and no one knows when it will stop.

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Prof Succo-

Thanks for your last post; it serves to remind me of the manipulation going on. One example: Prof Sedacca's vibe yesterday concerning the fact that "magically" the 10-year yield should rise in tune with a 25 bp FOMC nudge.

The problem to me seems that yes the Fed and every other central banker can pump out debt BUT as we have already seen, the public, the consumer cannot take on more. Governments and other institutions cannot force more debt on a consumer that is already being squeezed to the hilt, perhaps more credit contraction, weak retail and housing numbers will be the only thing to wake people up to the fact that "things ain't good"...the consumer is obligated to pay their debts, Governments and other "institutions" do not....at least not yet(?).


Minyan Steve

MS,

I just had a "discussion" with Scott about Fed ideology.

It is highly improbable to me that the Fed genuinely believes that there is "excess savings" in the world, that they do not see anything wrong or untenable about "printing money and building debt." I feel that they know that the game must end at some point, but through hubris can put off and manage that end.

Scott believes that central banks actually believe that there is nothing wrong with their policy and that they think printing money is a viable strategy.

We both come out the same, vehemently against their hubris however it is founded. Debasing currency has a cumulative effect: adding debt and adding over-capacity, which is the problem they are trying to correct. It is like giving cocaine to a cocaine addict to make him feel better.

In the meantime the music continues and no one knows when it will stop.

-Succo

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