“The Fed is no longer the backstop to the financial system on a dark day. It’s the dominant player day in and day out.” Those are the dispiriting words of former Federal Reserve Board member Kevin Warsh. They bring to mind Warsh’s former boss at the Fed, Ben Bernanke.
Bernanke similarly believes the Fed fine-tunes economic outcomes. Think his quip to Milton Friedman way back when about how the Fed caused the Great Depression by tightening so-called “money supply.” Except that money in circulation is something no central bank or monetary authority could ever control simply because money in circulation is production determined.
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