A businessman and investor for whose judgment I have the highest regard had some thoughts about Tuesday’s Federal Reserve announcement:
“It is impossible to overstate the danger posed to the long-term stability of our country by current Fed policy, which has reached what one can only hope is the apogee of misplaced confidence in their ability to fine-tune the world. Fed policy, consisting of ZIRP (zero percent interest rates, which are now promised to be maintained for at least the next two years) and gigantic purchases of medium and long-term bonds (so-called QE, or quantitative easing), is unprecedented in monetary history.
“Despite the marked lack of success of such policies in generating growth and employment gains, despite having being followed for almost three years (although they claim success because the economy did not collapse, and because there is a purported ‘profit’), the Fed is now powering ahead with more of the same.
“These policies [ZIRP and QE] cheat savers out of a fair return on their capital, and virtually promise an explosion of price inflation at some unpredictable point in the future.
“At the same time as the Fed is assuming the role of the principal supporter of the economy, without acknowledging that it might already have done enough (or more than enough), the Obama administration is still promising to raise job providers’ taxes at the earliest opportunity, and is still railing against any real attempt to rein in the unpayable entitlements that make America insolvent.
“It is scarcely a surprise that gold has gone from high to high, as the only widely accepted real money and alternative to infinitely producible paper money. As people digest the latest Fed statement and contemplate the wildness of Fed policy and the possibility of the deployment of the ‘range of policy tools’ available to the Fed, I predict that many people will (and should) become very afraid that the value of their money and dollar denominated assets may go, just about literally, to hell.
“Poor policy and incompetent policymakers created these problems (financial crash, recession, and persistent high unemployment and sluggish growth), and better leaders can solve this. A crucial platform element in the next elections must be sound money, and our leaders and potential leaders should be determined to remove ‘employment’ from the mandate of the Fed (it is obviously hard enough for them to focus on even one goal — the protection of the value of money).”
William Kristol is the editor of The Weekly Standard, where this article appeared.