Tuesday, August 24, 2010

Fed Needs Mandate Ensuring Financial Stability: Stephen Roach

The Federal Reserve must cease promoting asset and credit bubbles.

Let my beloved come to his garden
And eat its pleasant fruits.

Song of Solomon

* * * * *

Commenting on an article appearing in today's Wall Street Journal ("Fed Split on Move to Bolster Sluggish Economy") Morgan Stanley non-executive chairman, Stephen Roach adds his voice to a growing chorus opposing monetary policy conducive to creating asset and credit bubbles.




The "big hole" the Fed is in has a name: it's called "technical insolvency." The Federal Reserve System plainly has lost all mooring ensuring financial stability. Is this not the same condition any bankrupt enterprise exhibits such as necessitates its reorganization?

The "longer-term strategy" Mr. Roach believes necessary requires replacing the imperialist monetarist system headed by the Federal Reserve with a sovereign credit system run through the U.S. Treasury along lines put forward by the nation's first Treasury Secretary, Alexander Hamilton, such as puts to practice the intention of President Franklin D. Roosevelt in his administration's push for the Bretton Woods agreement.

—Tom Chechatka

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