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Monday, April 11, 2011

Bernanke Shows Off His Rat DNA

Charlie Sheen has tiger blood. Federal Reserve Chairman Ben Bernanke has rat blood. That's the conclusion you come to when analyzing the starkly different decisions made this past week by the Federal Reserve and the ECB (European Central Bank). Rats like to multiple and that is what Bernanke is doing with the dollar – multiplying them. The ECB sees inflation and raised its interest rates. A measure designed to shore-up the Euro currency. Bernake happily continues with his counterfeiting operation (QE-2) as he keeps his foot on the dollar printing accelerator. Damn the dollar, full speed ahead.

Caroline Baum of Bloomberg goes over the Bernanke experiment:
Bernanke, Trichet Expose Their Respective DNA --

Two central banks look at the same underlying fundamentals, reach two different conclusions and take two different policy actions...

For the ECB’s Jean-Claude Trichet, the goal of the rate increase was to prevent “second-round effects in price and wage-setting behavior” from boosting inflation further. Euro- zone inflation rose 2.6 percent in March from a year earlier, above the ECB’s target of no more than 2 percent over the medium term. Trichet judged that the action was warranted to anchor inflation expectations.

Stateside, Fed chief Ben Bernanke looked at U.S. inflation of 2.1 percent and came to the opposite conclusion. He told an Atlanta Fed conference last week that any inflation from commodity prices would be “transitory” as long as inflation expectations remain “stable and well-anchored.”

Who’s right?

Two Roads Diverged...
Doug Nolan / Asia Times:
Diverging policies, again --
This is a dangerous period. Global liquidity is way too plentiful, while speculation has become too all-embracing and rewarding. Indications of monetary excess are everywhere. Indeed, we're in the midst of the biggest financial bubble in history (the "global government finance bubble") - yet everyone seems comfortably oblivious. The Fed will persevere with its doctrine of ignoring asset prices, government borrowing excesses, market distortions and rampant speculation. These don't, after all, even enter into their policy framework. The Fed is also determined to disregard increasingly entrenched inflation dynamics, convinced that its interest rate policy, quantitative easing programs and dollar neglect aren't behind the upsurge in commodities prices. Amazingly, the Fed likes what it sees and, much to the markets' liking, clearly prefers to stay the course...

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