The Fed

MAN Financial chief economist Dr Frank Shostak has a warning for investors.

It seems that the policy of transparency (transparent tampering) that Fed policy makers are striving to implement under the banner of achieving price stability might not be that good for the health of the economy. Also, it is a contradiction in terms to suggest that by means of manipulation of the price indexes and interest rates the Fed could somehow set the basis for the efficient allocation of resources and fulfill the role of an agent for economic growth.

Where is Bernanke going to create the next bubble, the one that will mask the hangover from the housing bubble in the same way that the housing bubble masked the hangover from the tech stock bubble?

Inflation, as this term was always used everywhere and especially in this country, means increasing the quantity of money and bank notes in circulation and the quantity of bank deposits subject to check. But people today use the term "inflation" to refer to the phenomenon that is an inevitable consequence of inflation, that is the tendency of all prices and wage rates to rise.

May this treatise stand as an example of how to fight for what is right even when everyone else is silent.

If history is any judge, financial meltdowns like what's happening in the subprime arena prompt the Federal Reserve to act in the only way it knows how. The Fed's playbook was written with its inception in 1913 and anointed by easy money cranks like Alan Greenspan and his successor in crime Ben Bernanke along the way.

We can thus conclude that it is irrelevant for the multiplier process whether the central bank targets the quantity of money or the interest rate. What matters here is that the central bank is always ready to accommodate commercial banks' expansion of credit out of thin air. Without the central bank's support the likelihood of a sustained multiplier process taking place is close to nil. Hence the notion of the money multiplier is not applicable to a truly free-market economy.

When I surfed into the Yahoo News web site Business section, I saw the

There is a definite connection between fiat currencies and trade deficits.

The "art of central banking" is the art of pretending to know what one does not know. Not only is it not a science; it is not even an art. At best it is alchemy; at worst it is a gigantic cheat.