The Fed

If pushing down the short-term interest rate doesn't seem to be fixing the economy, let's push down long-term rates and see what happens. Shucks, we might as well try! It would be a shame to not use this shiny printing press.

Bernanke's policy gun is out of bullets. His policies have brought low growth, high unemployment, and a 7.2 percent increase in producer prices over the last 12 months. Attempts at stabilization have instead wrought chaos.

The Fed's entire policy program suffers from the same defect that all market interventions suffer from. The moment you stop intervening, the underlying problems come to the surface again. Administrative price setting does not change economic reality, at least not for the better.

Banks can and do make clients shift from short-term deposits.

Bernanke figures he's done the stimulating; consumers need to put on a happy face and start spending.

Both the Federal Reserve and the European Central Bank are owners of the printing press. They produce base money.

In his speech at Jackson Hole, Wyoming, the Fed chairman disappointed most pundits. He did not promise another massive infusion of fake money, i.e., QE3. I suspect that a strengthening in bank lending is an important factor behind the Fed's decision to postpone it.

Although the trend could reverse, data from the past two months suggest that the inflationary big one may be upon us.  All of those pundits who hedged their predictions may need to go back to the drawing board. Recent releases from the Fed show that the excess reserves are starting to leak out.

Increases in money aren't sprinkled from the sky or distributed randomly throughout the population. They occur through the commercial banking system and the Federal Reserve. Those who receive the money first benefit at the expense of those receiving the money last.