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Bernanke Asset Purchases Risk Unleashing 1970s Inflation Genie

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October 26, 2010 – Comments (3)

For the second time since he became chairman in 2006, Ben S. Bernanke is leading the Federal Reserve into uncharted monetary territory.

Bernanke next week is likely to preside over a decision to launch another round of large-scale asset purchases after deploying $1.7 trillion to pull the economy out of the financial crisis, comments from policy makers over the past week indicate. This time, with interest rates already near zero, the Fed will be aiming to increase the rate of inflation and reduce the cost of borrowing in real terms. The goal is to unlock consumer spending and jump-start an economy that’s growing too slowly to push unemployment lower.

Estimates for the ultimate size of the asset-purchase program range from $1 trillion at Bank of America-Merrill Lynch Global Research to $2 trillion at Goldman Sachs Group Inc., with economists at both firms agreeing the Fed will likely start by announcing $500 billion after the Nov. 2-3 meeting. The danger is that once the Fed kindles price increases, inflation will be difficult to control.

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3 Comments – Post Your Own

#1) On October 26, 2010 at 1:06 PM, ContraryDude (33.52) wrote:

But what does Peter Schiff think?

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#2) On October 26, 2010 at 1:11 PM, kdakota630 (29.76) wrote:

ContraryDude

Good one, but I usually post my Peter Schiff stuff with my other account.  I would wager to say that he thinks this is another in a string of huge mistakes by Bernanke.

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#3) On October 26, 2010 at 2:14 PM, miteycasey (30.92) wrote:

Unlock customer spending? Really?

I thought that's what got us to where we are today. People spending money they didn't have.

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