From Humble Student of the Markets January 4, 2013 - 3:44am
With the release of the Fed minutes yesterday, some commentators (such as Steve Goldstein of Marketwatch) came to the conclusion that the Fed is running out of bullets:
To put it differently: the Fed thinks the economy isn’t that great and there’s very little inflation to worry about, but its primary program to improve the economy doesn’t do very much.
It’s a clear admission the Fed is running out of gun powder. And that’s quite a shot it has fired to the markets.
A sea change in approaches to central banking
I emphatically disagree. In the last few years, we have seen a sea change in the approach to central banking. Gone are the days of Paul Volcker's adoption of Milton Friedman's monetary paradigm of PQ = MV. In a speech by (then) Governor Ben Bernanke on July 23, 2003 entitled An unwelcome fall in inflation?, he implicitly dismissed excessive money growth as a source of ...