Look Out For His Right


Posted on : 11/21/2011 07:30:00 AM | By : Dann | In : ,

Attempts at government control of the economy always give me reason for concern.  The record for such control is not exactly stellar.

I wonder what trouble is lurking in our future.  In a modest bit of irony, the Federal Reserve in San Francisco has a model that you can play with that suggests where things might be heading in the near future.

Everywhere you look these days, it seems that ZIRP, or the Fed's Zero Interest Rate Policy, is the panacea to all the world's problems. In fact, ask any tenured economy Ph.D. what inflation is and you will get a stare down, be told you are a moron, that banks need to print more, more, more and that we are really roiling in deflation, with some latent mumblings about buying their economics textbook for the inflationary price of $124.95. Everywhere, that is except the Fed itself. Because in an extremely ironic twist, it is none other than the San Francisco Fed, which operates the "Be Fed chairman for a day" simulation, where you try to keep both unemployment and inflation within the "price stabeeleetee" barriers, that reveals the reality of ZIRP. The laughter really begins when one recreates precisely what the Fed is doing: namely the policy of Zero Interest Rates, now well in its third year, that things take a turn for the surreal. We challenge any reader to play the Fed simulation game, and to do what Bernanke has done: namely lock the Fed Funds rate at the legal minimum: between 0.00% and 0.25%. In our personal experience, we were dismissed as Fed Chairman after annual inflation literally went off the charts and hit 38.36% following 4 years of ZIRP.

If this model published by the Fed is right, then we have some dark days coming soon.

Of course, if it is wrong, then it still leaves open the question as to whether or not the "quantitative easing" and other Federal Reserve policies are good for the long term health of our nation.  If they can't publish a reasonably accurate model, then how can we trust their other decisions?

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