I'm not a Ron Paul fan but one has to wonder if his efforts to abolish the Federal Reserve Board might not be worthwhile. The Federal Reserve Board is charged with the conflicting task of maintaining monetary stability and full employment. When it acts to accomplish one part of the task, it virtually guarantees failure in achieving the other.

Inflation is the enemy of monetary stability. A weak economy is the enemy of full employment. The Federal Reserve Chairman strives to fight inflation by raising the interest rate target for Federal Funds. Unfortunately, rising interest rates lead to a weak economy and unemployment. Then he seeks to stimulate a weak economy by lowering interest rates. Lower interest rates perk up the economy but tend to cause inflation. Currently, the Fed Chairman is in a pickle. He's losing ground on both ends of his task, i.e., inflation is rising and the economy is getting weaker.

Many analysts attribute the current state of economic affairs to former
Chairman, Dr. Alan Greenspan. After all, they say, he was the one who lowered interest rates to one percent and kept them there too long. He was the one who allowed the housing bubble to inflate even larger. He was the one who left poor old Uncle Ben with a disaster waiting to happen.

Well, if you have read my essays of 05/05/06, 07/21/06, 08/11/06, 03/30/07, 06/08/07, 09/14/07, 11/16/07, and 01/11/08, you know I haven't been particularly overjoyed by Dr. Bernanke's management style and performance. So I'm not buying the Greenspan's at fault story. Dr. Bernanke has had plenty of time to show his stuff and as far as I'm concerned he's part of the problem, not the solution. He took the Fed Funds rate to 5.25% when he didn't have to; then he was too slow and too timid in lowering rates. Last Tuesday's surprising 75 basis point cut was reactionary, not well planned. So let's place the responsibility for the pickle he's in where it belongs. This mess is Bernanke's Baby.

WHEN TO GET OUT.
Two weeks ago we learned how to find the best strategies for going long in a new upwave. This week John Campbell will show us "How to Find the Best Exit Strategies" to maximize profits. Getting in is easy. Visit the VectorVest University to see When To Get Out.