I am deeply troubled by today’s move. It seems Alan is really out of touch with reality. He is doing something that he does not understand. The rate should have been kept where it was.
It is a grave mistake due to the following reasons:
1. there is no inflation, not even sign of it in foreseeable future
2. Dollar has been strong and worries should subside on the strength of the greenback
3. yield curve is about to invert which is going put a screeching brake on credit market. In other words, banks will have difficulty borrowing short and lending long. Marginal borrowers like GM will get whacked.
4. detrimental to US export which is supposed to create jobs and GDP
I have met with Fed people in the past and my impression was that the executives were no smarter than what the positions required. But they are surely arrogant.
Benenke is going to be ousted within 18 months.
Fed needs total revamp.
