Open Market Operations, Interest Rates and Gold

I also wanted to chime in on this article by Minyan Mish:

"Remember that the Fed can not force anyone to borrow who does not want to, nor can the Fed force banks to lend. Regardless of whether the Fed targets money supply or interest rates or the price of gold, the Fed is not in control of bankruptcies, foreclosures, job hiring, or the velocity of money. Those last two sentences are crucial to the deflationary argument. Bankruptcies and foreclosures are soaring, consumer spending is sinking and jobs will follow housing with a lag."

This is the key paragraph in Minyan Mish's piece - and yes I agree fully with it. The Fed is not manipulating money stock directly through the NY Fed desk's control of fed funds.

That said, I would not be surprised whatsoever that other unofficial, undisclosed activities existed for more nefarious purposes - either alone or in combination with other central banks or large commercial bank partners. Never underestimate a monopolist in their quest for continued riches and power.

His larger point that Americans gorging on debt is the problem of - voila - Americans in the end is spot on. The Fed can hold out the candy but it's the toothless child that must take it. Institutional incentives/structures like the Fed, the FDIC, various financial intermediaries, the GSEs, etc. all make matters worse because they are all holding out candy but in the end the public needs simply to look in the mirror for the culprit to this particular debt bubble.