At MarketWatch Sven Henrich castigates the Federal Reserve Board of Governors and those who rely on them:
Stock markets can’t sustain gains or record prices without intervention, without a helping hand, without dovish and intervening central banks. This has been true for 10 years, and it continues to be true in 2019 because that’s where all the big gains are…
This is not capitalism, nor does this ongoing farce constitute free-market price discovery. It’s politburo-based central planning, desperately trying to keep the balls in the air.
“To extend the business cycle,” Powell said this week. Since when is this the primary purpose of the Fed? What happened to inflation and price stability? Already they are tossing their stated inflation goals and are talking about letting inflation run hotter if they can juice it up. There’s no integrity, only moving targets and carrots driven by equity prices.
The pretense is gone; it’s all about keeping the illusion alive that the Fed knows what it’s doing, that it’s always there to save markets from any trouble.
But its track record is obvious: It has failed to meet its inflation targets (ill-guided as they may be) for 10 years. It has failed to normalize policy despite years of promises to do so, and will never be able to normalize. Between 2008-2019, the Fed was non-accommodative for three months. It blew up in their faces in December. They’ll never be non-accommodative again. They can’t.
That means two things. First, it means that not just the U. S. Federal Reserve but all of the central banks will not have the ability to act when the next contraction occurs. They know that they should have raised rates long ago but they didn’t have the courage to do it. Now rates have been kept low during an expansion for far too long. That by the law is the pragmatic reason that MMT can’t work. Policy-makers will never take the necessary actions on a timely basis and things will inevitably get out of hand.
But second it means that income and wealth inequality, driven by the central banks’ urge to create asset inflation by any means necessary, will grow beyond anything we’ve ever seen.