We must indeed fret the possibility of some fundamental lack of character at the Federal Reserve

Sir, Henny Sender makes a well argued call in “The Federal Reserve must not linger too long on QE exit” July 5; concluding with opining that “The Fed wants to have its cake and eat it too”, and asking “Might it be that the Fed has everything in reverse?" It is truly scary stuff! 

On August 23, 2006, you published a letter I sent titled “Long-term benefits of a hard landing”. Therein I wrote:

“Sir, While you correctly argue (“Hard edge of a soft landing for housing”, August 19,) that “even if gradual, a global housing slowdown would be painful” you do not really dare to put forward the hard truth that the gradualism of it all could create the most accumulated pain.

Why not try to go for a big immediate adjustment and get it over with? Yes, a collapse would ensue and we have to help the sufferer, but the morning after perhaps we could all breathe more easily and perhaps all those who, in the current housing boom could not afford to jump on the bandwagon, would then be able to do so, and take us on a new ride, towards a new housing boom in a couple of decades.

This is what the circle of life is all about and all the recent dabbling in topics such as debt sustainability just ignores the value of pruning or even, when urgently needed, of a timely amputation.”

And now Sir, soon eight years later, we can only observe how the Federal Reserve, even when facing clear evidence all what their liquidity injections and low rates have achieved is increasing or maintaining value of existent assets, and little or nothing has it done for the creation of any new real economy… are unwilling to cut the losses short, and keep placing more and more bets on the table… with our money!

Sincerely, no matter how we look at the Greenspan-Bernanke and incipient Yellen era at the Fed, we have reasons to fret the existence of some fundamental lack of character.

PS. Of course, when it comes to banks, the regulators have already evidenced plenty lack of character with their phobia against “the risky”. And so now they also have our banks placing ever larger bets on what is “safe”, blithely ignoring that in roulette, as in so many other aspects of life, you can equally lose by playing it too safe.