Another unbelievable story from the frontlines...

Here's another unbelievable story from the frontlines.

Yesterday I was at Fox and I bumped into John Ryding of RDQ Economics (that's the name of his firm). Ryding used to be the Chief U.S. economist at Bear Stearns (you may see why Bear fell apart in a moment).

I asked Ryding what he was going to speak about and he replied, "Monetary suicide by the Federal Reserve."

I asked him why he was calling it "monetary suicide?"

He said, "Because that's what the Fed was doing."

Suicide is killing yourself, so I don't quite get how the Fed is comitting suicide, but I digress.

I explained that all the Fed was doing is targeting bond yields lower and the way it does that is by buying bonds. That adds to reserves in the bankng system, which basically just sit there and earn some pittance of interest.

Then he said this...

"I get the part about how the Fed is boosting its balance sheet, but the question is, where are they going to get the offsetting liabilities?"

I kid you not; that is what he said.

I sat there, stunned.

I said, "You mean reserve credits?"

He said, "Yeah."

I told him that reserve credit are just created with a touch on the Fed's computer. Those are credits to the banking system that are called, reserves.

He seemed completely at a loss to understand this.

So here's a guy who many know and who is considered to be one of the top Wall Street economists yet he shows himself to be glaringly uneducated when it comes to the Fed and monetary operations. "Where will they get the liabilities to offset their asset purchases???"

I kid you not, that's what he said.

You can't make this stuff up.

Do you wonder, anymore, why we're in such trouble?