The Fed -- Maybe They've Gone Over The Top

Ok, the FOMC has announced it is committing to buy up to $1 tril.
additional securities, including $300 bil. of Treasuries (quantitative
easing). They want to rescue the economy and do Their bit to help
out globally. I get it. But, this latest round of monetary expansion
grievously offends my sense of proportion and balance. To
analogize, the FOMC is building this enormous casino with every
gambler's interest and amenities provided for. But, the US private
sector is looking maybe to enter the casino once in a while, and needs
but a cup to hold quarters for the slots. In short, the Fed is
seeking to replace a credit regimen that may be too large for the
times we have entered.

Inflationary? Could be. But this action will create a liquidity load
in the system that could destabilize the economy and the capital
markets, especially when it comes to shrinking this vast pool.
Monetary tightening down the road that could involve removing
$1 tril. from the system could have unintended but very disturbing
consequences, inflation notwithstanding. Restoring integrity to the
Fed's balance sheet long term could prove a daunting task indeed.

I say all of this because I do not think the economy needs this much
liquidity to recover and prosper. Savings = investment, so even if
the economy saves more at the expense of a measure of short term
growth, liquidity for longer term investment will be provided
internally. I would like to see economic growth proceed from cash and
carry to modest credit expansion, which seems far more appropriate.

I understand the fear of a deflationary spiral into depression. But I
think folks need time to reassess their priorities and to budget
accordingly. That means a blend of incremental spending and
savings should be expected rather than having everyone only
pinch pennies and wait around to be laid off.

So, I am now out of synch with this decision to build so grand a
monetary edifice. It raisies substantially the risk of unintended
economic disequilibrium and dislocation.