–Fed Operating In Fisc/Regulatory Labyrinth As Seeks Growth,Price Stab

By Steven K. Beckner

Instead of taking the debt downgrade verdict to heart, the Treasury
has sought to discredit the credit rater.

Is it any wonder that S&P and market participants more generally
question America’s will to get its debt under control?

And that’s not all that’s facing the beleaguered American economy.
As a number of Fed officials have observed, mounting regulatory burdens
are taking a heavy toll on business’ willingness to hire and invest. It
is impossible to calculate the true cost or “hidden tax” of government
regulations. Economists disagree on that. But Fed officials say there
has seldom been a more uncertain climate for business hiring and
investment.

The National Labor Relations Board’s unprecedented ruling that
Boeing Corporation may not open a new plant in South Carolina is just
one of the more egregious examples.

Yet no one, including the Republican leadership, has talked
seriously about rolling back the huge federal regulatory apparatus, much
less closing down agencies. Indeed, there is often minimal Congressional
oversight of the vast rule-making and administrative law processes.

At the Fed, Volcker’s activist successor is a believer in
aggressive and preemptive monetary easing and has shown himself willing
to try almost anything. Interjecting himself into the fiscal debate, he
has advised against short-term spending cuts on the grounds that it
might hurt the economy. And so spending cuts are put off into the “out
years” when no one can be sure of what future Congresses will choose to
do.

Today’s central bank frequently pledges fealty to “price
stability,” yet sometimes seems prepared to countenance more inflation
and dollar depreciation as the price of bringing down unemployment. In
the process it runs the risk of compromising its own independence in
pursuit of a will-o-the-wisp “accomodation” of growth.

It’s a very different time to be sure.

** Market News International **

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