…… The approximate hour Janet Yellen spends wandering in circles and spewing double talk during her post-meeting pressers is time well spent. When the painful ordeal of her semi-coherent babbling is finally over, she has essentially proved that the Fed is attempting an impossible task.
And better still, that the FOMC should be abolished.
The alternative is real simple. It’s called price discovery on the free market; it’s the essence of capitalism.
After all, the hot shot traders who operate in the canyons of Wall Street could readily balance the market for overnight funds. They would do so by varying the discount rate on short-term money.
That is, they would push the rate upwards when funds were short, thereby calling-in liquidity from other markets and discouraging demand, especially from carry trade speculators. By contrast, when surplus funds got piled too high, they would push the discount rate downward, thereby discouraging supply and inciting demand.
This post was published at David Stockmans Contra Corner on August 9, 2016.
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