- 12 Mar 2010 14:34
#13342692
I disagree, I think Fed policy turned what was potentially a depression into a painful recession.
Inflation and inflation prospects are low. If anything I think the Fed is being too hawkish on inflation (signalling interest rate increases down the road). If the banks had collapsed we'd be back in 1929, no question in my mind.
Now, yes, I agree with the argument that the banks need more regulation, more supervision, and the "too big to fail" phenomenon has to go. But injecting the funds that the Fed did was in my view the right decision.
Letting Lehman collapse was probably a mistake in retrospect considering the panic in the markets that followed it (well the panic didn't directly follow the collapse of Lehman, it followed the Fed/Congress squabbling the next day). But the money supply would have shrank precipitously if the Fed hadn't boosted total reserves as it did. That would have meant a depression, IMO.
And, along with executive policy validation... going to cause our "recession" to hurt for several magnitudes longer and deeper.
I disagree, I think Fed policy turned what was potentially a depression into a painful recession.
Inflation and inflation prospects are low. If anything I think the Fed is being too hawkish on inflation (signalling interest rate increases down the road). If the banks had collapsed we'd be back in 1929, no question in my mind.
Now, yes, I agree with the argument that the banks need more regulation, more supervision, and the "too big to fail" phenomenon has to go. But injecting the funds that the Fed did was in my view the right decision.
Letting Lehman collapse was probably a mistake in retrospect considering the panic in the markets that followed it (well the panic didn't directly follow the collapse of Lehman, it followed the Fed/Congress squabbling the next day). But the money supply would have shrank precipitously if the Fed hadn't boosted total reserves as it did. That would have meant a depression, IMO.
When I was a child, I spoke as a child, I understood as a child,
I thought as a child: but when I became a man, I put away childish things.
For now we see through a glass, darkly.
His name was spessul olymmian
I thought as a child: but when I became a man, I put away childish things.
For now we see through a glass, darkly.
His name was spessul olymmian
) 
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