Wednesday, April 10, 2013

The accounting FED

Many economists and those less endowed are at the misimpression that the FED has been doing the right things. Little do they know that the FED, whose chairman had the right prescription for the Japanese a full decade ago would suffer from amnesia and take a course, dramatically opposite to it. Salt water freezes at lower temperatures but the brains of those closer to the oceans, do so faster.

Moving money around never increased value for anybody or anything - countries, companies and individuals included. Buying liabilities of the banks and giving them reserves in return that gained interest did not either. As most first year business school students know by now, dressing up the balance sheet does not increase value – for most of the value of an enterprise emanates from its ideas, people and intellectual property – none of which are balance sheet items. Placing accountants on top of companies, countries and monetary authorities are value destroying. Worse, those who are economists but doubt their own ideas could not do any better.

It is time for a monetary revolution – those with brains speculated over half a century ago that the targeting of money supply will lift production and welfare and at the very least keep the incompetent and impotent fiscal stimulus at bay. There is little know-how left, concentrated around the fresh water lakes ever dominated by those who are still willing to imbibe the toxic brine.