How to Make the Dollar Sound Again

Here's a must read from James Grant, one of the more intelligent and dead-pan humorous guys on the street in my opinion.

In Gold We Trust

A realistic alternative to QE 2

The results of the most recent and much anticipated Fed meeting are out. The Fed is going to purchase $600bil in bonds through June 2011 to help stimulate the economy by flattening out the middle of the yield curve. The hoped for stimulus resulting from this move will be lower mortgage and interest rates which will theoretically make it easier for small businesses to get loans for expansion and eager home buyers to get a piece of the American Dream. Not sure how that will help stimulate employment though. From my vantage point, it doesn't matter how low mortgage rates go if nobody will refinance or lend to you without a job. And with few exceptions, I'll wager not many small businesses are eager to expand in the current political climate. From a saver's point of view, with money market rates already well below 1%,  it's not like anybody is going to go out and buy a Chevy Volt off their earned interest. It's hard not to conclude that if the Fed continues down this path they are going to lose credibility in the not too distant future; at which point, "...backed by the full faith and credit of The United States of America"--the phrase that underpins our debtor nation--will be worth less than a wooden nickel.