Get Ready for Interest Rate Shocks
One of the important messages coming out of the central banker’s annual retreat in Jackson Hole, Wyoming is that once the crisis is over the Federal Reserve’s (Fed) tightening of monetary policy may be abrupt. If so, increases in short term interest rates will not be gradual but jarring. The reasoning behind this approach, as I understand it, is that (1) since there could be political pressures to monetize the government debt and (2) given the large amount of existing liquidity that needs to be drained the Fed’s exit strategy needs to be unmistakably clear in communicating that it will not tolerate the unanchoring of inflationary expectations. Here is the New York Times:
And here is the Wall Street Journal on the talk Carl Walsh gave at the retreat:
[O]nce the Fed does start raising the federal-funds rate out of its current record-low range near zero, “it should be increased quickly,” Mr. Walsh argued. “There is no support for raising rates at a gradual pace once the zero rate policy is ended.”
More Stimulus Spending than Originally Projected
As Robert Wenzel points out..When reading it, keep in mind that Farrell and Greider, while understanding what the Fed is up to, don't really want to abolish the concept of a central bank. They want to "democratise" the Fed or create a new type of central bank that is more responsive "to the people." They don't seem to get that it is any central fiat money creating force that will always be the focus of evildoers who want to control it. The only real solution is to end the Fed and return to a 100% gold backed currency, since gold can't be printed at will. Also remember we are a Republic and Democracy is Not Liberty!