Gold prices have surged by over $90/troy oz. following the Fed’s decision not to taper its bond buying program and the likelihood that inflation dove Janet Yellen will be Bernanke’s replacement. Yellen has said she will keep inflation under control, but does she have what it takes? Link Bloomberg:
“It is an open question,” said Calabria, director of financial regulation studies in Washington at the Cato Institute, a policy research group that espouses free markets. “Can she be Paul Volcker if she needs to be?”
Volcker, the Fed chairman from 1979 to 1987, lifted the short-term borrowing rate to 22 percent to strangle inflation, snuffing out growth. The campaign drew a backlash from builders and others upset about the loss of work.
“People don’t send you two-by-fours when you are washing the system with liquidity,” Calabria said, referring to surplus lumber sent to Volcker in protest. Under Bernanke and Yellen, asset purchases have swelled the Fed’s balance sheet to a record $3.72 trillion.