Young Research & Publishing Inc.

Investment Research Since 1978

Disclosure

  • About Us
    • Contributors
    • Archives
    • Dick Young’s Safe America
    • The Final Richard C. Young’s Intelligence Report
    • You’ve Read The Last Issue of Intelligence Report, Now What?
    • Dick Young’s Research Key: Anecdotal Evidence Gathering
    • Crisis at Vanguard
  • Investment Analysis
    • Bonds
    • Currencies and Gold
    • Dividend Investing
    • ETFs & Funds
    • Investment Strategy
    • Retirement Investing
    • Stocks
    • The Efficient Frontier
  • Investment Counsel
  • Dynamic Maximizers®
  • Retirement Compounders®
  • Free Email Signup

Fed Makes Mistakes

September 26, 2019 By Jeremy Jones, CFA

The Fed Compounds Its Mistakes – Allan Meltzer, The Wall Street Journal
“The Federal Reserve seems determined to make mistakes…Anyone can make a mistake, but wise people don’t repeat the same one. Increasing inflation to reduce unemployment initiated the Great Inflation of the 1960s and 1970s…The most important restriction on investment today is not tight monetary policy, but uncertainty about administration policy. Businesses cannot know what their taxes, health-care, energy and regulatory costs will be, so they cannot know what return to expect on any new investment…The only lasting solution for housing is to let prices fall to a new equilibrium. Painful, yes, but necessary. Temporary palliatives such as lower interest rates delay that adjustment…Once the economy does begin to heat up, the Fed will urgently need to reduce excess bank reserves lest they stoke inflation. The Fed has talked about policies it can use to do so, such as raising the interest rates it pays to banks to hold their reserves. It has not offered a coherent, credible program to do so since it does not say, and probably does not know, how high the market interest rate would have to be…Adverse public reaction to higher interest rates has stopped anti-inflation policy many times in the past…Or will interest rates rise, pushed up by a flight from government bonds? That’s a risk that does not seem to bother many. Not yet, but it should, and it will…One of the main reasons offered by some Fed governors and market portfolio managers for more stimulus is the fear of deflation. Yet the annual rate of increase in the consumer price index has remained between 1.2% and 2.5% every month this year. No evidence of deflation there. In fact, the Fed’s inflation target is said to be between 1% and 2%, just about where it is…The fear of mild deflation is another mistake, one commonly made. In the almost 100 years of Federal Reserve history, periods when prices declined over several months have occurred seven times. Sometimes the deflation reached 30%, yet the recoveries that followed six of the deflations cannot be distinguished from any other post-recession recovery…Countries with a depreciating exchange rate, an unsustainable budget deficit, and more than $1 trillion of excess monetary reserves are more likely to inflate.”

Share this:

  • Email
  • Twitter
  • Facebook

You Might Also Like:

  • This is What Terrorizes the Fed
  • How Far will the Fed Push Markets to Get 2% Inflation?
  • Has the Fed Lost Control of Short-term Interest Rates?
  • Author
  • Recent Posts
Jeremy Jones, CFA
Jeremy Jones, CFA, CFP® is the Director of Research at Young Research & Publishing Inc., and the Chief Investment Officer at Richard C. Young & Co., Ltd. Richard C. Young & Co., Ltd. was ranked #5 in CNBC's 2021 Financial Advisor Top 100. Jeremy is also a contributing editor of youngresearch.com.
Latest posts by Jeremy Jones, CFA (see all)
  • Are Google, Amazon, and Microsoft About to Crash This Specialized Real Estate Market? - June 29, 2022
  • Regulators’ Bungled Attempts to Cut Emissions Drove Oil Prices Higher - June 28, 2022
  • What Happens to Your Passwords When You Die? - June 27, 2022

Search Young Research

Most Popular

  • Will the Fed Stick to Its Course?
  • The Power of a Compound Interest Table
  • RECESSION? Dow 25,000, $8 Gas, Rising Interest Rates, Spell Mid-term Crack Up
  • Investing During a Recession
  • Vanguard Wellesley (VWINX) vs. Wellington (VWELX): Which Fund is Best?
  • Swiss National Bank Surprises World with Rate Hike
  • Kellogg Cuts Loose with Split Plan
  • Corporate Bond Yields: What You Can Earn Today
  • Predictions of MEGA-SPENDING on Metaverse
  • Apple Shares Resilient in the Face of Recession

Don’t Miss

Default Risk Among the Many Concerns with Annuities

Risk and Reward: An Efficient Frontier

How to be a Billionaire: Proven Strategies from the Titans of Wealth

Could this Be the Vanguard GNMA Winning Edge?

Cryptocosm and Life After Google

Warning: Avoid Mutual Fund Year End Distributions

Is Gold a Good Long-term Investment?

How to Invest in Gold

Vanguard Wellington (VWELX): The Original Balanced Fund

What is the Best Gold ETF for Investing and Trading?

Procter & Gamble (PG) Stock: The Only True Dividend King

The Dividend King of the North

You’ll Love This if You’re Dreaming of an Active Retirement Life

RSS The Latest at Richardcyoung.com

  • 10th AMENDMENT: Dobbs Decision a Win for States’ Rights
  • What Just Happened? Fixing Its Historic Mistake
  • Why Work When Taxes Take It All?
  • Oil Demand Increasing Despite Growth in Renewables
  • Why Is the USDA Burying the Facts on Low-Carb Diets?
  • These Normal Household Products Could Disrupt Your Endocrine System
  • Zelensky Asks G-7 for More Assistance Fighting Russia
  • AFGHAN WITHDRAWAL: State Department Accused of “Coverup”
  • Saudi Oil Is Different from U.S. Oil?
  • Your Survival Guy in Paris: Awakened from His Slumber, “Dad, I’m Going to London”

About Us

  • About Young Research
  • Archives
  • Contributors

Our Partners

  • Richard C. Young & Co.
  • Richardcyoung.com

Copyright © 2022 | Terms & Conditions

loading Cancel
Post was not sent - check your email addresses!
Email check failed, please try again
Sorry, your blog cannot share posts by email.