Federal Reserve under fire as commodity bubble wreaks chaos; WSJ says Bernanke addicted to printing

Sri Lakshman Kadirgamar, former Foreign Minister for Sri Lanka, right, confers with Minister of Information and Media, Mr. Mangala Samaraweera on July 28, 2005 in Temple Trees, Colombo, Sri Lanka. Mr. Kadirgamar died in a hospital on August 12, 2005 after being shot by a sniper near his guarded home in the capital Colombo, according to a Sri Lankan diplomat in Washington, DC. Photographer: Sebastian Posingis/Bloomberg News 28.07.2005 Temple Trees Colombo, Sri Lanka

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.

Too Far

“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