I wrote a nice big hunk about why thins guy is somewhat full of shit, and then accidentally closed the tab. I then wrote what you now see and my internet service went down (fucking Comcastic). Since I wrote it the fed has made some announcements that bear on Christopher Whalens policy prescriptions.

This guy is a financier. His job is to make money by lending money. Higher interest rates may help support higher loan rates, but I don't see how that will stimulate housing demand or help Main Street. I smell a rat when a financier at a major bank talks about how his interest is seeing main street do well.

There will probably be no further quantitative easing, if Whalen thinks there will, than he knows something most people don't or he is a fool. If the economy shits the bed the fed will do more QE, if it limps along or grows then the Fed wont.

No federal reserve member want to raise interest rates to help Main Street. All of them fear that higher interest rates will hurt the recovery, but some fear inflationary pressures more than they are worried about the more short term dangers to growth. This is where I suspect the author is a stinking rat banker, he sees higher interest rates as a vehicle to greater banking profits and tries to dress it up as a boon to us all.

There is no common "Catch 22" that all the global central banks are facing. The challenges to central banks are extremely diverse right now, many are trying to fend off inflationary pressers, and are pretty much doing the exact opposite of the Fed, this is the case for most the more prosperous developing world, probably a good half of the G20 could be considered in this camp. The EU as represented by the ECB is trying to stave off the collapse of several counties and is doing it poorly. The ECB has way less of the tools that the fed does to promote monetary stimulus. The action of the ECB are in no way comparable to Fed policy. There are plenty of other policies that are being pursued world wide, Russians are trying to suck every last drop of blood out of their people, the Africans are alternatively basking or being crushed under the weight of rising commodity prices. Christopher Whalen either has no idea of what the position of world wide central banking is or he has some ulterior motive that he hope to push with this point. I can't fathom what it would be, but you can never tell when you are dealing with sneaky bankers.

Whalen want to see asset prices preserved. He means housing, at least I think that's what he means. Banks own a bunch of housing investments that they would like to see hold their value. The banks helped us get where we are today by pushing a housing bubble, now they want us to help them keep their profits while the rest of us suffer. Houses are for people to live in, they should have a relatively stable value as a function of average income. Houses have not gained a massive increase in thier utility over the years, they were merely subverted into investment vehicles by irrationally exuberant consumers and stinking rat bankers. In the long term a correction in the price of homes relative to other goods will probably be good for our economy. I don't own a home, but would like to, this may distort my perception of the best policy in regards to this issue.

*Update. The Fed announced that the current 2nd round of QE would be the last, and that interest rates would stay at their current target. Pretty much everything Christopher Whalen said was needed isn't happening. I think that the likely hood that the Fed is acting in what they view as the best interest of the overall economy is pretty likely and that policies pushed by bankers are profit oriented and are for the most part anti-social.

The speech by Janet Yellen that paco has posted above should also be taken with a grain of salt. Federal Reserve Governers are like magicians, they know what they want you to see, understand and do. Anything that keeps pushes your focus away from their goals will be hidden from view. I have no doubt that the sagacious Ms. Yellen has our best interest at heart, but she also is fighting to propagate her world view.

Now for a anecdote. I was taking a class about the economics of war and empire. The class read Joesph Stigletz "Three Trillion Dollar War" and had to do a some kind of paper about the readings. A member of my class was flying to San Fransisco for the weekend to hang out with some friends and was trying to write said paper while on the flight. He had a first class ticket, took his early boarding, and promptly set to work on his paper. He overheard the flight attendants gossiping about whether the person who was taking the seat next to him was who they thought it was, but he paid it no mind, there was work to be done. His row mate was an older lady, very friendly, and extremely interested in "Three Trillion Dollar War." "What made you read that?" she asked? "What class is it for?" "Who is your professor?" "Let me see what you have written?" The lady was persistent, but my classmate would have none of it, he had a paper to turn in Monday morning and and lots of partying to do over the weekend, damned if some old lady was going to interrupt his work. He head the lady mention to her husband that what he was reading and why he was reading it, but the whole thing was getting tiresome, he put on his headphones and pushed into his work. The lady and her husband quickly disembarked when they landed, gone before my classmate had packed up his work. "Was that lady famous or important?" he asked the stewardess as her was getting off the plan. "Oh yes, that is Janet Yellen, the president of the San Fransisco Federal Reserve Bank." The man sitting next to her was her noble prize winning economist husband. It's not every day that you refuse homework advice from a Federal Reserve Governor and a Noble Laureate.

I can't help but get the feeling that US monetary policy is like steering a fish-tailing car, where we tend to over-steer rather than under-steer to correct our course. At the same time, I think we have been able to get away with this reactionary economic strategy by shirking off some of the pain upon the rest of the world. For example, QE is very unpopular outside the US, but we are the biggest kid on the block, and so it is.

I see a parallel within the US economy itself, where the wealthiest have been able to spin risk and pain off upon the labor and consumer classes.

To me, understanding this, and not completely resenting it (regardless of your class), is a large part of what it means to be an American.