We have long held Paul Volcker, William Poole and Jerry Jordan in high respect as former Fed governors. When they speak we listen, although Jerry seems to be more reticent, enjoying his retirement these days.
In a discussion with Kathleen Hays this afternoon during her "On the Economy" show on Bloomberg Television, Bill Poole took uncharacteristically sharp exception to the latest decisions by the Bernanke FOMC from their December Meeting minutes.
"The Fed is now expanding its balance sheet by printing money."
He was also visibly perturbed that the FOMC appears to no longer be stepping up to managing the money supply which is its mandate, but rather is allowing the Board of Governors to expand the money supply 'willy-nilly' with no eye to targets, just an uncoordinated roll out of special facilities.
For a minute we had to make sure this was Bill Poole speaking and not Willem Buiter, who delivered a round house commentary at Jackson Hole on the Bernanke Fed.
Yes, this is not the first time you have heard this, that the Fed is now printing money, monetizing the debt, especially if you are a regular reader here.
But it was unmistakable that in Bill Poole's mind the FOMC has now "crossed the Rubicon" and "will greatly regret their recent decisions in the future."
Jimmy Rogers has it right. "Bernanke’s going to keep printing money until they run out of trees."
The Fed is confident that they know how to stop inflation after the Volcker era, this much they have said, and it is clear they are acting on that belief.
A lot of theories are going to be road-tested, and the experiment in monetary and Keynesian economics will be rigorous.
This will be interesting, indeed.
Facilis descensus Averno;
Noctes atque dies patet atri ianua Ditis;
Sed revocare gradum superasque evadere ad auras,
Hoc opus, hic labor est.
Smooth is the descent, the way down below;
Day and night the gates of Hell stand wide open;
But to retrace your steps, and return to clear skies:
This is the task, this is the real work.
Vergil, Aeneid
