Bernanke’s big mistake

The problem with Bernanke’s policy of perpetual ZIRP is that it destabilizes other nations and their banking systems. I look for a lot of nations to respond to this with capital controls in some fashion.   The flood of dollars from the FRB’s policy will otherwise drive up other currencies and foment inflation.

The US is replicating the Smoot-Hawley mistake of the Depression in a rhyming fashion. Back then, the US was an exporter that foolishly raised tariffs. This decreased exports, deepening the depression. The British pound was the reserve currency.

Today, the US foolishly destabilizes its main asset, the reserve currency. Other nations will probably dump the dollar or respond with capital controls, resulting in higher costs for US consumers and businesses,  worsening America’s economic problems.  A lower dollar means higher prices for imported goods, which of course America is highly dependent on.

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: