Why DLS is so Under Valued, page-19

Here is the Fed's mandate.

http://www.federalreserve.gov/faqs/money_12848.htm

By bringing interest rates to zero during the Greenspan era during the 10 years prior to the last crash and printing 4.5 trillion dollars in the last 7 years and holding rates at zero bound for the last 74 months I'm finding it very hard to see how these actions can be consistent with one of the Fed's three mandates which is "moderate long-term interest rates". Their definition of long term is clearly more than 20 years. So long as to be laughable.

I used to think that no money is really lost when markets crash as for every seller their is a buyer. The guy who loses money buying at the top has only given that money to the guy that sold so the money is not lost, just transferred from the loser to he winner. The problem with this is that it doesn't take into account slippage which was clearly at play last week. When the buyers close their cheque books and you find that the S&P500 gives up the gains that it made in the course of about 500 days of trading in only one or two sessions, then wealth, be it engineered by central banks or not, is actually getting destroyed.

Anymore of these "Flash Crash Monday" type of events and we will see a rout on the markets which will lead to a recession in the US within a year. What is more the Fed will have run out of all levers to pull the economy out of this recession. No doubt in my mind.

I wonder if that recession will be consistent with the Fed mandates?

Eshmun