The Fed is under assault for its QE2 program and rightly so. They are jeopardizing the future of this country and perhaps the world with the arrogant belief that they can manage the economy via monetary policy. They cannot improve matters, but they can certainly make things much worse. As described by Robert P. Murphy:
The world financial system is incredibly complex. … the policy of quantitative easing is analogous to someone trying to jerk ketchup out of a bottle. The first few attempts, and nothing seems to happen. But then a careless lunge can lead to disaster.
Mr. Murphy provides one of the possible scenarios that might result from Ben Bernanke’s fatal conceit. He describes how the Fed might lose control of the pressures and distortions they are creating. His scenario is plausible and a worthwhile read for anyone concerned about how this worsening financial nightmare could end.
