How does someone this stupid get to be a Fed President?
Hoenig tells the Times:
I advocate dropping the ‘extended period’ language from the F.O.M.C.’s statement and removing its guarantee of low rates. This tells the market that it must again accept risks and lend if it wishes to earn a return.
Has he not noticed? The market is accepting risks, lending like crazy to good credits that want credit. Rates everywhere are at rock-bottom because there's so much demand to lend.
But that's just about the only good thing going on in the economy now. And there is far more demand to lend than there is to borrow, which is another reason rates are at rock-bottom and the main reason why Fed policy is not going to cause inflation. Push market rates higher by removing the "extended period" language, and even this small amount of lending slows down.
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