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Fed Joins ECB in Moving the Goal Posts To Justify Perpetual Monetary Bailout

Feb. 23, 2020 (EIRNS)—Readers of EIR Daily Alert will recall that on Feb. 19 we reported that the European Central Bank had justified its zero and negative interest rate policy by lying that inflation in Europe was still below its 2% target, a sleight of hand achieved by simply excluding real estate prices from their calculation of inflation—as if people no longer need to have a place to live or worry about the cost of such a luxury. (See “German S&Ls, Economists Expose ECB Cheating on Inflation Rate,” EIR Daily Alert, Feb. 19, 2020.)

The Federal Reserve is embarked on a similar justification for their panicked policy of unending pumping of funds into hedge funds, banks and zombie corporations that are dead to rights bankrupt. Fed Governor Lael Bainard delivered a speech at a Feb. 21 University of Chicago-sponsored monetary forum, in which she argued that the Fed should not stop pumping in funds once the 2% inflation target is reached, because it has to make up for past “shortfalls.” It should instead keep its foot on the gas pedal and overshoot 2% until the “average” hits the targetted amount 2%. Bloomberg helpfully informs its readers that the average inflation rate has been 1.4% since 2012—which presumably means that the Fed should keep gunning it until inflation hits, say, 2.6% for another eight years. In other words, “policy may have to remain accommodative for a long time,” Brainard offered, while describing her proposal to move the inflation goal posts as a “flexible inflation averaging approach” or, more succinctly, “opportunistic reflation.”

Why? Because the Fed needs to adopt even more aggressive measures “to counter future economic downturns,” Brainard explained. “Today’s new normal calls not only for a broader set of tools, but also a different strategy. We should clarify in advance that we will deploy a broader set of tools proactively to provide accommodation when shocks are likely to push the policy rate to its lower bound.”

Where is this all heading? Towards a hyperinflationary blowout. As Bloomberg recalled, “The Fed is engaged in an in-depth review of its policies and practices that is aimed at finding ways to cope with a new normal of subdued inflation and low interest rates. The review is expected to be completed by the middle of this year”—that is, unless the whole trans-Atlantic financial system vaporizes before then.

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