While I supported Federal Reserve actions during the 2008-9 financial crisis, the actions ever since have been counterproductive. decisive short term actions to prevent another depression and restore confidence were necessary. As the economy recovered late 2009-10 this short term flood of cash into the system should have gradually been removed and interest rates allowed to slowly return to a more normal level. Instead the Fed has announced additional quantitative easing and is purposely keeping interest rates at artificially low levels.
Negative Implications of Loose Monetary Policy: 1. Puts pressure on the dollar leading to higher import costs on commodities such as oil. No wonder gasoline was near $4 for awhile and in 2012 likely to go alot higher. 2. Higher inflation and inflation expectations. No wonder gold has been rising. Does anybody believe government statistics on inflation? 3. Artificially low interest rates punish savers, especially the elderly reducing income. This is negatively impacting the growth of our economy. 4. There is the potential for an escalation of inflation with all the money floating around should the economy turn around. 5. The Fed's actions continue to raise uncertainty about the health of the economy and if things will ever turn around.
In this view our next president must appoint a new Fed chairman with greater emphasis on fighting inflation.
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