When Fed Chairman Alan Greenspan held rates down at an abnormally low level for an extended period, the unintended consequence was a housing and debt/leverage bubble. Are there potential unintended consequences to Bernanke’s current monetary policy, which some are calling Quantitative Easing Infinity? Mauldin explores QE Infinity: Unintended Consequences.
Up for discussion: Unemployment; personal consumption expenditures; living in uncertain times; spending like drunken sailors; the ineffectiveness of QE1 and QE2; and the magnitude of the problem.
America risks passing an economic, fiscal and financial point of no return. The problems are close to being unmanageable now. If it stays on the current path, the US will wind up being completely unmanageable, culminating in an unwelcome explosion and crisis.
The fixes are blindingly obvious. Economic theory, empirical studies and historical experience teach that the solutions are the lowest possible tax rates on the broadest base, sufficient to fund the necessary functions of government on balance over the business cycle; sound monetary policy; trade liberalization; spending control and entitlement reform; and regulatory, litigation and education reform. The need is clear. Why wait for disaster.
To read John Mauldin article: QE Infinity: Unintended Consequences
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