Thursday, March 04, 2010
"An ancestor of mine maintained, that if you eliminate the impossible, whatever remains, however improbable, must be the truth."
Bernanke's refusal to engage in the Vulcan logic encapsulated in the above quote is tantamount to establishing a priesthood at the Fed. They simply cannot return from their chosen path. This is most unfortunate. This is the modern equivalent of drawing more blood from the patient with viral/infection symptoms, but unfortunately lacking a Hypocratic focus on doing no harm.
Top-down measures, including TARP and the currenct policy of ZIRP and QE, based on arbitrary access (and perhaps influence) by money center banks, has had very little effect for over 5 quarters. At this point, the economy may improve, but this will be a pity, for the Fed, the Executive, and the Legislative branches will have learned very little.