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Tuesday, October 12, 2010

Oh baby.

The Fed has shot its bullets. They can help if there was a threat of deflation or another financial crisis. But if you have ever heard the aphorism "the Fed can't push on a string" are seeing it now in real time. Chairman Bernanke said recently that central bankers can't solve all the world's problems. In other words there are limits to what they can do to help.

The problem and most of the solution rests with fiscal policy and that should have you worried sick. And just for good measure the Fed is now talking about climbing the Phillips curve again like in the 60s and 70s. That's stupid.

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