The Little Book of the Shrinking Dollar: What You Can Do to Protect Your Money Now

Running Out of Tricks

Right now, the Fed chairman has very few tools at his disposal.

Under his call, in 2008, the central bank cut its main conventional tool for slowing down and speeding up economic growth—the Fed funds interest rate—to near zero. But that didn’t pull us out of recession.

Next, he tried the unconventional.

He exploded the Fed’s balance sheet by buying up $2.3 trillion worth of bonds to drive down borrowing costs even further. (For this you can bet he was criticized for risking a weaker dollar and inviting inflation to come knocking!)

Now the Fed Chair is focused on replacing maturing securities with longer-dated bonds . . . but that’s still not enough juice.

His job, though you might not guess it, is to ensure maximum employment and stable prices. Yes, sometimes we do pity him, but that’s what Congress insists he do according to the Federal Reserve Act.

Here’s just how desperate the Fed is to influence markets.

Starting in 2012, the once super-secret Jackson Hole crew will now begin publishing its policy makers’ forecasts for interest rates—most importantly signaling when interest rates will rise.

Naturally, the move is billed as a new approach to deliver greater clarity about what the Fed is up to. Really, it seems like a last-ditch effort to tip their hand and control what the stock market is doing—via the media.

What kind of card game is this? After each meeting they’ll publish the projected appropriate level for the main Fed funds rate in the final quarter ...