printIts old tricks are bad enough, but when an wrecking-ball like the Federal Reserve Bank tries something “new,” there’s even more reason to be afraid:
“T]here is something new [and ominous] in the present [quantitative easing] cycle,” warns Murphy, Robert P. Murphy, in the latest Mises Institute “Austrian.”
“The Fed is trying to raise rates while simultaneously maintaining its bloated balance sheet. It is attempting to pull off a magic trick whereby it can keep all of the ‘benefits’ of its earlier rounds of monetary expansion (i.e., “quantitative easing” or “QE”) while removing the artificial stimulus of ultra-low interest rates. …”
“Raising interest rates without selling assets,” gives us “the worst of both worlds.
We still get the economic effects of “tighter monetary policy,” because the price of credit is rising as it would in a normal Fed tightening. Yet we don’t get the benefit of a smaller Fed
footprint and a return of assets to the private sector. Instead, the US taxpayer is ultimately paying subsidies to lending institutions to induce them to charge more for loans, while the big banks and Treasury still benefit from the effective bailout they’ve been getting for years. …
Important reading: “The Fed Can’t Save Us” by Robert P. Murphy.