Putting the Quantitative Cart Before the Horse

Here we go again? Maybe:

In an interview with the Financial Times, John Williams, president of the San Francisco Fed, said that the weak outlook and the extent of downside risks “would argue for further action” but the counter-argument was doubts about tools such as QE3.

However, Fed officials are determined to ensure that the economy makes progress towards lower unemployment. In June, the rate-setting Federal Open Market Committee still forecast a decline in the unemployment rate over the next few years, albeit very slowly. Any downgrade to that forecast would be a likely trigger for further action.

Repeat after me: Printing money does not make people rich. Letting people figure out how to make money in a free market, that’s what makes people rich.

Washington has forgotten this (and Obama never knew it), which is why the Fed has resorted to trying to make people feel rich, by printing all this Monopoly money. As long as the former continues, so will the latter.

But it still won’t work.