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Coal for Christmas

For the past year and more we have had a perpetual "Santa Claus" at the Fed with the policies overseen by Ben Bernanke.  It is these policies as much as anything that led to the wild ride we have seen in prices over the past couple of years.

Anna Schwartz, co-author with Milton Friedman of the classic “The Monetary History of the United States,” had the following to say to the Wall Street Journal in August:

"If you investigate individually the manias that the market has so dubbed over the years, in every case, it was expansive monetary policy that generated the boom in an asset. The particular asset varied from one boom to another. But the basic underlying propagator was too-easy monetary policy and too-low interest rates that induced ordinary people to say, well, it's so cheap to acquire whatever is the object of desire in an asset boom, and go ahead and acquire that object. And then of course if monetary policy tightens, the boom collapses."

She also had words of caution for those who would trust the Fed for a solution:

"In general, it's easier for a central bank to be accommodative, to be loose, to be promoting conditions that make everybody feel that things are going well." 

Thus we have multiple problems facing us going forward.  Recovering from the debacle of "too-easy monetary policy" while dealing with an increasingly interventionist central government.  That's what I call "coal" in the country's Christmas Stocking.

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November 2018


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