Between stimulus and response is our greatest power- the freedom to choose."- Stephen Covey
Today the Fed gets together and will have a chance to make a case for its past policies and future policies. The thing is if you take a bow for successful past policies why would we need new policies? I
n fact, this is the meeting where we should hear the Federal Reserve is unwinding its byzantine array of policies and schemes because they were no longer needed. Instead, many stock market bulls are hoping to hear about the latest bright idea known as sterile easing that would pump even more cash into the system but apparently this tranche wouldn't have any influence on inflation.
I'm not sure how it would work, but it stands to reason if it's hedged to the point of not being inflationary then it's going to be dead on arrival. On the topic of money-printing, there is growing speculation that China might spring a new stimulus program.
In addition, rumors suggest China will reverse the slide of its currency immediately and rejoin the race to the bottom. China is in a bind, and it would like to make the transition toward more domestic growth but jumping that track is not without possible peril, and maybe leaders are losing their nerve. The Chinese economic miracle is known the world over and cannot be completely derailed now.
Of course, in China there is no pressure from concerned citizens to stop policies that could actually be detrimental down the road. In fact, at this point people in China are so hungry they want the party to rock at its highest level possible, and everyone wants to get on the dance floor.
Even if they had the freedom to choose, it occurs to me folks in China aren't interested in moderating opportunity or even inflation (to a point).
The odd thing is in the land of the free we don't have freedom of choice, either. The Fed gets to decide if the risks are worth the rewards. Scuttlebutt last week had the Fed working on a way to pump money into the system without triggering inflationary pressure.
Sure, food is through the roof and gasoline is through the roof but the Fed is going to prime the pump in such a way that it will defy logic, arithmetic and sanity.
The thing is America is sitting on a powder keg of real stimulus in the American people, American businesses (large and small) and American pride. We have been seduced into putting all that on the shelf to let Washington drive the bus much like Beijing drives everything in China.
It's been the one-two punch of fiscal and monetary policies that haven't worked, but through the process created greater threats. Sure, the market has inflated, but home prices are still dropping and wages are flaccid, too.