Friday, August 20, 2010

Fed's Hoenig: Keeping Rates Too Low 'Dangerous Gamble'

Fed's Hoenig: Keeping Rates Too Low 'Dangerous Gamble'
The Federal Reserve is undertaking a "dangerous gamble" by keeping rates at near zero for so long, and must start raising rates or risk damaging the nascent U.S. recovery, a top Federal Reserve official said on Friday.

"To be clear, I am not advocating a tight monetary policy," Kansas City Reserve Bank President Thomas Hoenig said in the text of a speech to the Lincoln, Neb., Chamber of Commerce. "I am advocating a policy that remains accommodative but slowly firms as the economy itself expands and moves toward more balance."

Someone within the Fed saying their policies are dangerous and equating them with gambling. If the market was allowed to move by itself, it would be slowly repricing debt up...just as Hoenig suggests. Artificially keeping rates low was what caused the sub-prime mortgage crisis. Why are we doing it again? Answer: because it benefits the federal government. Who it hurts is us. You never want to compete with the government. You will always lose. They can rig the game in their favor, which is exactly what they are doing.

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