Does the Fed Subsidize the Wrong Behaviors?

There’s a fascinating, dense post on the interrelationships among Fed policy, the financial world, and the present economy from Jeffrey Snider at RealClearMarkets. Here’s the conclusion:

The Fed continues to believe, or at least continues to think that enough others believe, QE’s are a net benefit and that volume-type inflation will eventually break through and create a real recovery at some point. I tend to believe that this continuation of rigidity and asymmetric risks are nothing more than the uninterrupted devolution of banking away from actual intermediation. QE’s are no better monetary propositions than those hybrid Bernoulli CDO’s. Money and credit get less and less productive, while accumulated “capital” still embeds more and more artificial risk. Does any of this volume expansion “buy” actual economic progress?

I think this fits in with the common theme I mentioned below. Doing the wrong thing even for the best of reasons and with the most decent of intentions is a pretty bum solution.

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