Back on the Kudlow Report at 7:00 pm this evening to discuss the Fed, today’s big market drop, and maybe even some housing.
Here is food for thought regarding the Fed action, via (former) Dallas Fed Prez Bob McTeer:
The FOMC’s decision to limit the shrinkage of its balance sheet is modest indeed since allowing any shrinkage is, in effect, a tightening of monetary policy. They didn’t adopt easy money; just less tight money.
People argue that other things are more important in getting the economy moving again: removing the threat of major tax increases; removing the threat of major regulatory burdens, etc. Okay, but fixing those things are not an alternative to monetary measures. They are a complement. Do both. It really doesn’t matter which would be the stronger medicine.
It is important to remember that the Fed did not ease monetary policy yesterday. It acted to limit the tightening that would automatically have taken place with the run-off of mortgage backed securities. It may not be enough. We need gradual growth in the balance sheet to support gradual growth in the money supply. (emphasis added)
As always, it should be fun.
UPDATE: August 11, 2010 7:30pm
That was fun.
(I always feel like I am speaking to quickly, trying to get everything out in 30 seconds. The beauty of radio is you get time to discuss things in more details).
I’ll post the video whenever it shows up online . . . (Video is posted here)