Of Course Palyi Was Right

The Anti-Bernanke's Early Warning on Quantitative Easing - Total Return - WSJ: "In a prescient warning of what contemporary economist Carmen Reinhart calls “financial repression,” Palyi foresees “a ‘totalitarian’ control of credit under which treasury financing can be cheaply carried out in spite of raising the national debt…by the new system of combined and interconnected open-market policies.”

“Thus,” he concludes, ”what was supposed to be a policy of maneuvering on the open market [leads] to a system which ends for the time being the existence of an open market.”

Quantitative easing, in effect, runs the inherent risk of turning into a policy stance that central banks themselves can’t exit. Eventually, Palyi argues, the assertion of control may morph into a situation beyond their control.

Palyi’s essay was published in July 1939. For decades, he seemed wrong.

We can at least hope that he doesn’t turn out to be right now."

Just open your eyes and look. RTWT.