Jim Rickards: The fed is racing to create inflation before the US economy implodes!
Welcome to Capital Account. It's Federal Reserve Interest Rate Decision day! As expected, the Fed announced it will expand its bond-buying program with 45 billion dollars a month in longer-term treasury securities, after the conclusion of Operation Twist at the end of this year. In a different sort of twist, the Fed also announced it is now tying interest rate guidance to economic guide posts. The FOMC released a statement announcing that they anticipate the "exceptionally low range for the federal funds rate will be appropriate at least as long as the unemployment rate remains above 6-1/2 percent, inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee’s 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored.” At the press conference Bernanke announced that the FOMC members would take into consideration a variety of metrics for determining inflation, but how will the Fed use this data to make its long term inflation predictions? We ask Jim Rickards of Tangent Capital Partners if this gives the FOMC more subjective leeway to ignore potentially high short term price inflation. He explains that this gives the Fed the room to tell the public “inflation is what we say it is.”