MIT Grad is confused about the Fed

Says Mr. Kocherlakota:
Its fear of sharp interest-rate increases renders it unable to provide enough stimulus when needed.

When asked why they’re gradually removing monetary stimulus even though inflation remains too low, Federal Reserve officials tend to offer the same refrain: If they don’t start moving now, they could eventually be forced to raise rates more sharply when the economy overheats. This fear of raising rates rapidly is a relatively recent phenomenon -- and it’s a key drag on the overall U.S. economy.

Tell the good doctor that interest paid in minus interest paid out is constant under Fed rules.  The only thing the Fed does is move up and down the yield curve finding something for its staff to do. That can be proven because the net flow at the Fed is its own expenses.

So, all the currency risk goes where?  Who is doing all the borrowing on the Fed sheet? Why Congress, and that makes Congress bear currency risk, and they have fouled that job something fierce.

The best tuning strategy for the Fed is to adjust the Fed position on the yield curve to keep Congress sufficiently constrained, constrained to sequester only.  And that is the plot, it has worked for ten years past, it worked for Bubba, it will work for Trump. Just squeeze,squeeze,squeeze.