Interest Rate Roundup

Wednesday, September 23, 2009

Fed to markets: Party on!

The latest Fed meeting just wrapped up. And as I expected, policymakers decided to keep the liquor flowing and the music playing as loud as possible!

Specifically, the Fed kept its interest rate target unchanged at 0% to 0.25%. It also signaled that it planned to maintain “exceptionally low levels of the federal funds rate for an extended period.” That’s as close as the Fed comes to yelling “Party on!”

As a result, we’ll likely see the dollar continue to fall ... commodities continue to rise ... and all asset classes inflate. The Fed is effectively printing money out of thin air and handing it to speculators the world over. That’s driving down the value of the dollar and driving up the nominal price of assets.

This is the same garbage policymaking that helped inflate the tech bubble and the housing bubble. But you know what? The Fed never learns! It just keeps going back to the old playbook. We don't have to like it, but we do have to accept it, at least as long as Ben Bernanke is in the driver's seat.


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