Out-of-Control Fed

Reader comment on: Read It Here First

Submitted by Fast Eddie (United States), Mar 29, 2012 11:55

It is difficult to believe that Congress would have given the Fed the

powers it is exercising now, in terms of debt creation/dollar devaluation, if

the Congress could have foreseen the havoc that a Fed chairman can cause to

the U.S. and world economies over the course of just a few years. It is truly sad that, in

the supposed pursuit of helping housing recover by keeping interest rates low,

the Fed has essentially destroyed the income from interest bearing accounts

and instruments that many people, myself included, vitally need to literally put

food on the table because we were foolish enough (and far more than old enuf)

to retire a few years ago.

As far as I can see, the real purpose of Bernanke's sub-zero (taking inflation into account)

interest rate policies is to maintain a huge taxpayer subsidy for the few

largest too-big-to-fail banks and make it possible for them to give the appearance

of being sound when, in fact, most of them would be far underwater if the actual values

of their real estate portfolios were used in the calculations.

When interest rates return to their long term values, something that even Bernanke will

eventually be unable to stop, the interest that must be paid on the U.S. national debt will

explode by hundreds of billions of dollars, i.e., from under $200B now to well over $500B

under even the most benign scenario, and to as much as $1T under not-so-benign scenarios.

When that happens, the current budget battles will seem like tiny skirmishes compared to

the havoc that will ensue when the Congress has to impose some combination of service

cuts and tax increases to raise the hundreds of billions of revenue that MUST be raised if

default on the debt is to be avoided at all costs.

Fasten your seatbelts. It's going to be a bumpy ride.

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