“I am 100% confident the Fed can control inflation” – Bernanke, 2010

Two news items to consider ahead of the Federal Reserve’s next manipulation of US interest rates. One, Ben Bernanke, Chairman of the Federal Reserve, decided on Operation Twist, a policy whereby the Fed sells short-dated government paper in order to buy the longer-dated sort. It sounds boring but it involves $267 billion, so it’s kind of consequential all the same. Oh, and traders warned that the disappearance of the Fed’s holdings of short-dated government paper could gum up those markets, thereby causing costs greater than any likely benefit. But still, mere reality doesn’t deter Bernanke, who asserts, “We are prepared to do what’s necessary. We are prepared to provide support for the economy. Additional asset purchases would be among the things that we would certainly consider if we need to take additional measures to strengthen the economy.”

So: once again, a further $267 billion of your money is being put at risk on a complex long-dated debt operation of dubious benefit, while the leader of that operation comments that much more money might be needed down the road. That’s news item one. Continue reading →