Eliminating Uncertainty

When I first heard that the Federal Reserve had pledged not to change our interest rates for two years, I didn't really know what to make of it. That's bold, I thought. And if circumstances change, I can't even imagine they'd hold themselves to it. But it was, I thought, at least an attempt to create some certainty in our economy. Uncertainty, with our business community and people unsure what the heck the federal government will tax or regulate and how that will affect them, seems to be the prime obstacle to economic growth. I'm no economist, but some certainty can't hurt, right?

Sadly, while the administration (well, the Feds are strictly speaking independent of the administration, but you know what I mean) has erased some uncertainty with this move, it has apparently replaced it with the certainty that the government will not defend the dollar until after inauguration day in 2013:

“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. It is devilishly hard to preserve the value of paper money even when authorities are determined to protect it. The Bernanke Fed, in contrast, is willing to risk everything on its utterly unproven conviction that inflation is not and will not be a problem, and that its supereasy policies will not debase the value of money and cause a run on the dollar against one or more of the following: gold, other currencies, or commodities. Or a massive fall in long-term bond prices. Or a ferocious rise in consumer prices.

The bucks in your pocket and savings account will erode in their value faster than you can earn them. How fast is the only question mark. I guess I picked the wrong week to quit sniffing glue.

I was wrong in my criticism of this administration on leadership. The buck really does stop here.