The View From 1776
Friday, December 19, 2008
Helicopter Ben Hovers
The Federal Reserve chairman is notorious for his vow to fly over towns and dump wads of currency onto them as part of Keynesian-doctrine expansion of the money supply to lever up consumer spending. He’s effectively doing it, big time.
The Federal Reserve’s balance sheet is roughly two and a half times as large ($2.2 trillion vs $887 billion) as it was at the outset of the credit crunch. This prodigious expansion has been floated on fiat currency: manufactured money with no more support than bookkeeping entries.
Wall Street types and liberal-progressive-socialists applaud all of this as a means to shorten the recession. Wall Street stock brokers and money managers want the stock market to go up today, even if the Fed’s actions portend massive inflation tomorrow.
But fixed income investors and currency traders, having a somewhat more future-oriented perspective, are voting against Helicopter Ben. Read A Dollar Referendum: Currency markets reflect a lack of faith in Bernanke.
For additional background on the inflationary bias imparted to the economy by the Fed’s excessive money supply expansion, see: