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Bernanke, money, properly defined, must exhibit three characteristics: it must be a medium of exchange, a unit of account, and a store of value. The mere fact that such a policy has not set off a storm of protest and investor panic highlights the widespread misunderstanding among the Smart Set in regards to the subject of money - specifically, what exactly it is. The policy the Federal Reserve has now made explicit is one most often associated with Central American banana republics, and that alone should have given Fed officials pause to reconsider their actions. Bernanke, "is most common in poor countries or in countries wracked by war or natural disasters." 1 Or, the jaded might add, in a country wracked by economic illiteracy. Quantitative easing, again according to Mr. Both engender a surge in available money and credit.
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The results are exactly the same: they both involve "an expansion of the central bank's balance sheet," as Ben Bernanke himself puts it. Whether this massive emission of new money by the central bank is brought about through direct purchases from the central government (QE) or from the politically connected banks (CE) is immaterial.
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(Lehman Brother's Richard Fuld is the lone exception.) If we are going to listen to the likes of Jamie Dimon and Lloyd Blankfein regarding financial matters, we might as well use the sad-sack New York Mets as a guide on how to run a successful baseball franchise. It's degenerated into a deaf, dumb, and blind lender of last resort to any institution with the right political connections, and become an out-of-control machine emitting continuous streams of new money and credit, all to guarantee that the losers who destroyed their firms can still fly around in GV jet planes and appear on CNBC to regale us with their supposed market wisdom. This was too easy to predict for the past few decades the response of US monetary authorities to any crisis has been the same - print more money.Īt this point, the Federal Reserve has morphed into something that even its founders never dreamed of back in 1913. With the US economy stalled despite the trillions of "stimulus" funds larded out to the politically connected, the people who helm the Federal Reserve likely felt they had no other choice. The recent decision by the Federal Reserve to keep its balance sheet stuffed to bursting with whatever the Wall Street banks decide to throw onto it came as no surprise and crushed any hope that the Fed would tone down its policy of quantitative easing (QE) - or credit easing (CE), as Mr.