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The Fed Is Killing the U.S. Economy: John Tamny

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The Federal Reserve holds its last policymaking meeting for 2012 this week. The central bank is widely expected to continue its aggressive quantitative easing program, which it announced in September.

Ben Bernanke will also hold his last press conference for the year where he will give his outlook for 2013.

Related: The Fed Will Keep Printing Until the Dollar Gets Weaker: Jim Rickards

In a recent article, John Tamny, editor of RealClear Markets, calls the Fed's quantitative easing program "the monetary policy of the adolescent."

The Fed currently purchases $85 billion worth of long-term securities a month. Forty billion of that is allocated to mortgage-backed securities and the Fed's QE program. The remaining $45 billion is allocated toward Operation Twist, which is the selling of short-term treasury bills to buy long-term treasury bills. Operation Twist is set to expire at the end of the year.

Tamny joins The Daily Ticker's Aaron Task in the accompanying interview. He says the Fed believes that money grows on trees.

Related: The Fed Will Keep Printing Until the Dollar Gets Weaker: Jim Rickards

"Basically, if you want money, just go ahead and create it and when you create that paper ticket you are actually creating wealth," Tamny says. "We know logically in the real world that none of this is true. If the path to prosperity is creating dollars, then counterfeiting would be legal and would be encouraged."

Tamny, a long-time Fed critic, believes the U.S. central bank is destroying the dollar. He writes:

"The silver lining amid these troubled times is that the Bernanke Fed is being discredited right before our increasingly adult and wary eyes. The country's prolonged malaise will be the undoing of the Fed as we know it."

But as Aaron points out, if you look at the U.S. Dollar (^UUP) and Treasuries (^TNX), it does not appear that the markets are currently discrediting the Fed.

Related: Gold's Uptrend Is Still Intact: Peter Schiff

What's Ahead for 2013: The Fed & Economy

In addition to reaffirming its QE program, Tamny expects the Fed to announce an extension of its zero short-term interest rate policy. As a result, his outlook for the U.S. is economy is rather grim.

"My outlook for the coming year is that there is going to be more of the same sluggishness," he says. "The Fed is killing the patient. A recession is a cleansing process that the Bernanke Fed is not allowing...as a result [Fed policies are] dragging the recession further and further into the future."

His prediction for slow growth rests upon a diminishing U.S. Dollar.

"There is no incentive to invest right now," he argues. "Why is there no incentive? Well, our central bank remarkably is on record as saying it wants to devalue the dollars that those investors are buying."

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