April 30, 2008 (LBO) – The Federal Reserve money printing that has fired a commodity bubble causing malnutrition and food riots in poor countries is increasingly coming under fire, with mainstream media adding their voice to a growing flood of critics. After the sub-prime bubble started to unravel last July the Fed has cut rates – the tap through which is money is printed for the banking system – from 5.25 percent to 2.25 percent.
The Fed has individually poured money into banks like Bear Stearns and has also started to lend cash to Wall Street against worse-than-junk-bonds mortgage securities, violating a time honoured central banking principle of lending against good collateral.
“Eight months into the Fed’s most recent rate-cutting spree, the evidence is overwhelming that it has been a major policy mistake,” the Wall Street Journal said this week ahead of a meeting of the Federal Open Market Committee which decides rates.
“Meanwhile, the Fed’s decision to open the general monetary spigots has inspired a global commodity boom unlike any since the 1970s.”
“Oil has climbed to nearly 119 dollar a barrel today from 70 dollars in late August, a 70 percent increase.
“Farm and other commodities have