What did the Fed just do?

Chairman of the Federal Reserve Ben Bernake pauses while speaking during a press briefing at the Federal Reserve 11, 2012 in Washington, D.C.

What did Federal Reserve Chairman Ben Bernanke do yesterday? He put speed limit signs up on the freeway.

Our economy is like a car driving on that freeway, and the Federal Reserve is at the wheel. Well, let’s make it just Ben Bernanke at the wheel, with the rest of the FOMC in the back seat, yelling driving advice at him. Ben doesn’t have control of the steering, exactly, but he does have his foot on the gas.

In the past, Ben and his ilk haven’t seen a need for any kind of speed limit when they’ve driven the economy. They keep a careful eye on the speedometer, of course, and they listen closely to the sound of the engine, but they decide how fast or slow the economy should go on their own. They don’t need no stinkin’ road signs.

Except that now they do. Ben Bernanke has got the accelerator pedal firmly pressed to the metal -- that’s all the bond buying you hear about that pumping cash into the economy. But while we are moving, we’re not what you’d call speeding.

See, right now the car -- our economy -- is really heavily weighed down. The suspension is maxed out, and the muffler is scraping on the road, throwing off sparks. It’s making horrible noises, and making people worried.

Inquiring minds want to know what it’s going to take to get Ben to ease off the gas and stop straining the engine like this. In the past he might have told them to mind their business. But this is the new millennium, and Ben’s an empathetic guy who believes in transparency, so he’s putting up some signposts to clarify things for us.

He's saying that he’ll keep the pedal to the metal until we hit either of two speed limits: 6.5 percent unemployment or 2.5 percent inflation. Only then will he stop buying bonds and allow interest rates to rise.

When will that be? The Fed projects that should happen in 2015. Let’s hope this old jalopy can last that long. I guess it’s a good thing it’s American made!

About the author

Paddy Hirsch is a Senior Editor at Marketplace and the creator and host of the Marketplace Whiteboard. Follow Paddy on Twitter @paddyhirsch and on facebook at www.facebook.com/paddyhirsch101
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I feel like I'm listening to the Great Leader media in North Korea....you guys are a hoot. No wonder no one is replying because, like me they have tuned you out. Now all we have to do is demand local public media stations not carry you at all....that is coming!

Bernanke's bond buyback is making what have always been safe investments for people now ever risky. He is basically trying to move people from the safety of bonds into the stock market in search of any return. Remember, he has eliminated any interest paid on bank savings accounts with his perennially 0% interest rate so now he is trying his best to push us from the last safe bastion...bonds.

People need to understand that the bond market is the next in line for Wall Street implosion as all the municipalities having corporate, shady pols are throwing their towns and states into financial peril yet again as they buy credit bonds and leverage municipal debt to the point of implosion.......just in time for those wild and crazy hedge funds who have $600 trillion in derivatives leverage and a doubling down on risk readying for the next economic crash not far along.

The subprime loan fraud was all about moving urban property owned by the working class and poor to developers who intend on developing these urban centers into affluent communities. What better way then to load these poor people struggling to survive and keep their homes with debt and then implode the economy. Well, this next massive scheme has the same intent......only this time it is to move all that is public into the hands of these same developers.....public schools and parks....as pols load up with municipal debt these hedge funds are working hard to implode the economy!

I learned that on NPR before it was taken over by Wall Street!

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