Courtesy of Pam Martens
Olivier Blanchard
There is now a growing chorus of people trying to legitimize the U.S. central bank, the Federal Reserve, having the option of buying stocks in the next financial crisis. This is such a stunning and dangerous development that it deserves to be on the front page of every newspaper in America – before President Donald Trump attempts to sign an Executive Order authorizing it. (We’re only half-joking about that.)
This is the highly suspicious timeline of the clamor to give the Fed carte blanche to do as it pleases when Wall Street blows itself up again:
Tuesday, September 4, 2018: JPMorgan Chase sends a research report to its clients which includes this statement from Marko Kolanovic, a Senior Analyst at the bank:
“It remains to be seen how governments and central banks will respond in the scenario of a great liquidity crisis. If the standard interest rate cutting and bond purchases do not suffice, central banks may more explicitly target asset prices (e.g., equities). This may be controversial in light of the potential impact of central bank actions in driving inequality between asset owners and labor.”
Saturday, September 8, 2018: The Federal Reserve Bank of Boston holds day two of its 62nd Economic Conference. The former Chief Economist of the International Monetary Fund (IMF), Olivier Blanchard, now a Senior Fellow at the Peterson Institute, also endorses the Fed being able to buy up stocks in the open market during a financial crisis. According to reporting at the Dow Jones news outlet, MarketWatch, Blanchard made the following remarks: the Fed could double its balance sheet and “nothing terrible would happen.” The best policy would be to buy stocks which “could do the trick and could work even better than buying long bonds.”
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