In his Congressional testimony last week in Washington, Fed Chairman Ben Bernanke took time to downplay the significance of the few dissenting voices on the Fed's Open Market Committee (FOMC). Those statements, combined with an even more dovish statement by Fed Vice Chairman Janet Yellen earlier this week, clearly reaffirm the Fed's indefinite commitment to $85 billion of monthly quantitative easing. (It is surprising that those figures failed to invoke the attention drawn by the $85 billion in annual cuts detailed in the "sequester"). But the stock markets have gotten the message loud and clear and are setting records on a daily basis. The apparent triumphs of the Federal Reserve in pumping up stock and real estate prices, without triggering a sell-off in the dollar or easily visible inflation, have not been lost by observers around the world.
Many have dubbed the last decade or so to be an era of easy money. As it turns out, that characterization may have been premature. Based on the new crop of central bankers who are primed to take control of the world's financial system, the age of truly easy money may be just getting started.
Many expect that when Bernanke's term expires in January 2014, he will be succeeded by the dovish Yellen. But that's just the beginning. In short order, a host of serial money printers will take up the reins at the world's most important central banks.
In January of this year Canadian banker Mark Carney, a committed Keynesian, was selected to replace Mervyn King as the Governor of the Bank of England in July 2013. Despite a native population of some 63 million people to draw from, the UK's so-called Conservative government has now, for the first time in its history, selected a foreigner to run the Bank. At a salary of some $1,200,000 a year, he will be earning more than that of the heads of the Fed and the ECB combined. Undoubtedly Carney can command such a salary because he can be relied upon to create synthetic Sterling along the lines of Bernanke. Already he is talking of increasing the UK's two percent upper inflation limit.
In a further effort to distort the value of money, the Deputy Director of the Bank of England, Paul Tucker, spoke recently of his idea to engineer negative interest rates. All this is to hold reality at bay.
