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Economists: Bernanke Rate Theory is WRONG
Moneynews ^ | Wednesday, January 20, 2010 | Dan Weil

Posted on 01/20/2010 5:31:51 PM PST by Comrade Brother Abu Bubba

Economists aren’t buying Federal Reserve Chairman Ben Bernanke’s argument that the Fed’s low interest rates early last decade didn’t contribute to the financial crisis.

In a recent Wall Street Journal survey of top economists, 42 said low rates contributed to the housing bubble, while 12 said low rates didn't contribute.

In recent congressional testimony, Bernanke said, "Regulatory and supervisory policies, rather than monetary policies, would have been more effective means of addressing the run-up in house prices.”

But economists weren’t swayed.

The basic problem was the mistake of raising short-term interest rates too slowly from 2004 through 2006, Miles Kimball of the University of Michigan told the Journal.

"Going up quicker would have been better."

Low rates weren’t the only factor behind the financial crisis.

Allen Sinai, chief economist at Decision Economics, offered these reasons to the Journal: "Low interest rates, financial innovations in mortgages, lax regulation, and speculative euphoria."

But Bernanke is wrong for trying to take low Fed rates out of the equation, economists say.

“The evidence is overwhelming that those low interest rates were not only unusually low, but they logically were a factor in the housing boom and therefore ultimately the bust,” Stanford University economist John Taylor told Bloomberg.

Dean Baker, co-director of the Center for Economic and Policy Research, agrees.

“Low rates certainly contributed to the crisis,” he told Bloomberg.

“I don’t know how he can deny culpability. You brought the economy to the brink of a Great Depression.”


TOPICS: Business/Economy; Front Page News; News/Current Events
KEYWORDS: bernanke; fed; housingcrisis; rates
"No country in the world has ever succeeded by debasing its currency," "That's what this man (Bernanke) is trying to do. He's trying to debase the currency as a way to revive America. It has never worked in the long term or the medium term." Jim Rogers

CNBC Interview: Jim Rogers, Abolish the Fed

1 posted on 01/20/2010 5:31:51 PM PST by Comrade Brother Abu Bubba
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To: Comrade Brother Abu Bubba

Economics is mostly about the efficiency of private-sector companies, but since economists don’t have real jobs, they don’t understand that. That’s the true downside of monopolies, for example, that the consumer is forced to overpay for an item, where they could spend their income elsewhere and get more “utility”.

Efficiency is the main driver of purchasable utility per dollar, or, in other words, the standard of living.

Every loafer who is getting paid is being paid out of higher prices for everyone.

Every opportunity that is found and used to produce goods or services more efficiently gives everyone a boost by lower the prices they pay - without anyone working any harder.

The idiots do plan on devaluing dollars to enable gov’t to pay back, but given the other economic effects that go with the devaluation, it looks doubtful. They are assuming that even with that maneuver, the economy will magically “come back” in the next year or two. They just can’t detail why that would happen...


2 posted on 01/20/2010 6:06:24 PM PST by PieterCasparzen (Huguenot)
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To: Comrade Brother Abu Bubba

Of course low rates contributed to the financial crisis. That’s not the question. The question is whether the Fed had any choice in the matter given the policy of Congress to pump trillions of dollars into the housing industry. If the Fed had kept rates high, it would have caused an immediate economic crisis, and Congress would have had a fit. It’s not the Fed’s role to decide how much money should be invested in housing. It’s also not the role of Congress to do that. However, having usurped the function of the market in that regard, Congress made the decision, and the Fed was bound to simply adjust to it. What the Fed did was try to keep the rates at a level where the rest of the economy was still growing, even though the Congressional housing policy was sucking it dry.


3 posted on 01/20/2010 6:07:00 PM PST by Brilliant
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To: Comrade Brother Abu Bubba
financial innovations in mortgages

A politically correct term for "giving loans to people who could not afford them"

EVERYTHING ELSE was SECONDARY to that prime mover cause. If they are never going to admit that we are doomed to repeat it.

Barney Frank and Chris Dodd are almost SINGLE-HANDEDLY responsible for this financial world-wide disaster.

4 posted on 01/20/2010 6:08:51 PM PST by Mr. K (This administration IS WEARING OUT MY CAPSLOCK KEY!)
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To: Brilliant
If the Fed had kept rates high, it would have caused an immediate economic crisis...

Can you please explain more about what this crisis would have been?

5 posted on 01/20/2010 6:37:42 PM PST by ConservativeMind (Hypocrisy: "Animal rightists" who eat meat & pen up pets while accusing hog farmers of cruelty.)
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To: Comrade Brother Abu Bubba
raising short-term interest rates too slowly from 2004 through 2006

Given that the asset inflation bubble had been going on since Burns as chairman it is a bit rich to suggest that the FED got the country into trouble with 2 years of bad monetary policy. The FED got the country into trouble with 30+ years of bad monetary policy. We got away with it because the dollar was the world's reserve currency since WWII.

6 posted on 01/20/2010 6:48:14 PM PST by AndyJackson
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To: Comrade Brother Abu Bubba
At best, Bernanke only spoke to the specifics. If residential real estate hadn't gone into bubble mode, something else would have.The low-rate policy all-but-guaranteed inflation somewhere in the system. The regulationary tightening would have been pushing down the bubble in the rug.
7 posted on 01/20/2010 6:51:24 PM PST by danielmryan
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To: Comrade Brother Abu Bubba
"No country in the world has ever succeeded by debasing its currency,"

If this is true, why does Rogers like China so much?

8 posted on 01/20/2010 6:56:54 PM PST by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: AndyJackson
In an ideal world (without the Fed jacking interest rates up and down at will), the market would set the interest rates by a meeting of supply of and demand for capital.

It actually works very well with the economic cycle that way. When times are good, interest rates are bid up because there is more demand for borrowing. When times are bad, interest rates are bid down because people will save rather than spend. At some point, the low interest rates become attractive to businesses who will then borrow, invest and rehire to improve the business cycle again.

This is why, before creation of the Fed, we had panics and economic downturns lasting a couple of years or less before they were righted.

Once the Fed seized the role of setting interest rates, downturns can last much longer, sometimes more than a decade as was the case of FDR.

9 posted on 01/20/2010 7:42:45 PM PST by Vigilanteman (Obama: Fake black man. Fake Messiah. Fake American. How many fakes can you fit in one Zer0?)
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To: Vigilanteman
Once the Fed seized the role of setting interest rates, downturns can last much longer

Do you have any numbers to back this up? I thought the downturns were less frequent and shorter, on average, after the Fed was created compared to before.

10 posted on 01/20/2010 7:58:05 PM PST by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: Comrade Brother Abu Bubba
"No country in the world has ever succeeded by debasing its currency,"

True, but what does it have to do with the Fed? It's not the entity that "spends us into prosperity" - that's what the Congress and executive branches of the government do to us, but it's always easy and fun to beat up on Fed.

Weak currency and big government spending has been the policy of Bush and Obama administrations and Democrats and Republicans in Congress. That is what's debasing the currency and puts strain on private sector commerce, spending and savings.

Fed's short-term interest rates are the bluntest tool in its arsenal, and affect all areas of the economy, not necessarily and not just the long-term rates of real estate market. Which is exactly what Bernanke is trying to explain and warn Congress against - Bernanke said, "Regulatory and supervisory policies, rather than monetary policies, would have been more effective means of addressing the run-up in house prices.”

Here is his speech in its entirety, not just the comments of other economists or market traders, with their own agenda - Chairman Ben S. Bernanke - At the Annual Meeting of the American Economic Association, Atlanta, Georgia - January 3, 2010 - Monetary Policy and the Housing Bubble

Also, Bernanke is on stand-by and is ready (with several monetary tools in Fed's disposal) to mop up the excess capital, when it becomes necessary. It's the Congress and the Obama administration that are keeping the fiscal "stimulus" going, in absence of Fed's monetary stimulus.
Taxpayer Burden Eases to $8.2 Trillion as Obama Supplants - BL, 2009 December 23, by Bob Ivry

Bernanke Warns Deficits Threaten Financial Stability - BL, 2009 June 03, by Craig Torres and Brian Faler

Bernanke Doesn’t Rule Out Using Rates Against Bubbles - BL, 2009 December 03, by Steve Matthews and Vivien Lou Chen

Bernanke Says Regulation Came ‘Too Late’ to Curb Housing Bubble - BL, 2010 January 04, by Scott Lanman


11 posted on 01/20/2010 7:59:34 PM PST by CutePuppy (If you don't ask the right questions you may not get the right answers)
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To: Toddsterpatriot
You can google the economic cycles or you can read any number of good books on the Fed. Before the Fed was organized, we called them panics (i.e. the Panic of 1836) because they lasted about one year).

After the Fed took over the role of setting interest rates, we had the mother of all depressions, 1929-1940. Our current recession will soon enter its third year with no real end in sight.

Once in awhile, usually by luck or coincidence, the Fed gets things right. More often, they magnify the very problems they were allegedly formed to solve. Read congressman Ron Paul's book on the topic for more insight.

I realize Paul is a raving moonbat when it comes to the War of Terror, but he is spot on when it come to the Fed. FWIW, I have a Master's Degree in economics and actually use it in my work. But don't take my word for it. Read Paul's book.

In my opinion, Andrew Jackson was one of our greatest presidents despite his sorry legacy of creating the spoils system because he had the good sense to kill the Bank of the United States, the first attempt to do to us what the Fed does now.

12 posted on 01/20/2010 8:08:05 PM PST by Vigilanteman (Obama: Fake black man. Fake Messiah. Fake American. How many fakes can you fit in one Zer0?)
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To: Toddsterpatriot
I thought the downturns were less frequent and shorter, on average, after the Fed was created compared to before.

Correct.
Recession History - A complete history of economic recession cycles in the United States.

13 posted on 01/20/2010 8:13:43 PM PST by CutePuppy (If you don't ask the right questions you may not get the right answers)
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To: Vigilanteman
NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Business Cycle Expansions and Contractions


US Business Cycle Expansions and Contractions ¹

Contractions (recessions) start at the peak of a business cycle and end at the trough.
Please also see:
BUSINESS CYCLE
REFERENCE DATES
DURATION IN MONTHS
Peak Trough Contraction Expansion Cycle
Quarterly dates
are in parentheses
Peak
to
Trough
Previous trough
to
this peak
Trough from
Previous
Trough
Peak from
Previous
Peak

June 1857(II)
October 1860(III)
April 1865(I)
June 1869(II)
October 1873(III)

March 1882(I)
March 1887(II)
July 1890(III)
January 1893(I)
December 1895(IV)

June 1899(III)
September 1902(IV)
May 1907(II)
January 1910(I)
January 1913(I)

August 1918(III)
January 1920(I)
May 1923(II)
October 1926(III)
August 1929(III)

May 1937(II)
February 1945(I)
November 1948(IV)
July 1953(II)
August 1957(III)

April 1960(II)
December 1969(IV)
November 1973(IV)
January 1980(I)
July 1981(III)

July 1990(III)
March 2001(I)
December 2007 (IV)
December 1854 (IV)
December 1858 (IV)
June 1861 (III)
December 1867 (I)
December 1870 (IV)
March 1879 (I)

May 1885 (II)
April 1888 (I)
May 1891 (II)
June 1894 (II)
June 1897 (II)

December 1900 (IV)
August 1904 (III)
June 1908 (II)
January 1912 (IV)
December 1914 (IV)

March 1919 (I)
July 1921 (III)
July 1924 (III)
November 1927 (IV)
March 1933 (I)

June 1938 (II)
October 1945 (IV)
October 1949 (IV)
May 1954 (II)
April 1958 (II)

February 1961 (I)
November 1970 (IV)
March 1975 (I)
July 1980 (III)
November 1982 (IV)

March 1991(I)
November 2001 (IV)
--
18
8
32
18
65

38
13
10
17
18

18
23
13
24
23

7
18
14
13
43

13
8
11
10
8

10
11
16
6
16

8
8

--
30
22
46
18
34

36
22
27
20
18

24
21
33
19
12

44
10
22
27
21

50
80
37
45
39

24
106
36
58
12

92
120
73
--
48
30
78
36
99

74
35
37
37
36

42
44
46
43
35

51
28
36
40
64

63
88
48
55
47

34
117
52
64
28

100
128

--
--
40
54
50
52

101
60
40
30
35

42
39
56
32
36

67
17
40
41
34

93
93
45
56
49

32
116
47
74
18

108
128
81

Average, all cycles:
1854-2001 (32 cycles)
1854-1919 (16 cycles)
1919-1945 (6 cycles)
1945-2001 (10 cycles)
 
17
22
18
10
 
38
27
35
57
 
55
48
53
67
 
56*
  49**
53
67
* 31 cycles
** 15 cycles

Source: NBER

Permission to copy is granted, provided credit is given


14 posted on 01/20/2010 8:46:12 PM PST by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: Vigilanteman; CutePuppy
Looks like Jun 1857-Jan 1912, 656 months, 14 recessions for 315 months. One recession every 3.9 years, lasting 22.5 months. Recession 48% of the time.

From Jan 1913-Dec 2007, 1139 months, 18 recessions for 243 months. One recession every 5.27 years, lasting 13.5 months. Recession 21% of the time.

Back of the envelop calculations, feel free to double check my numbers. Thanks.

15 posted on 01/20/2010 9:07:44 PM PST by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: Toddsterpatriot
Sounds right.

What is even more important, is that it's not really the Fed's job (and never has been, to my knowledge) to prevent recessions, not that they could even try with monetary policy. However, the financial and banking systems have been greatly stabilized and real financial panics have been greatly reduced since.

In that same vein, it also should be taken into account that Fed was formed in 1913, just around the time when socialist societies in the world and Keyensian economics in US (bigger and broader government involvement in country's economic activity) became fashionable, and just before the time of Wilsonian / WWI policies, FDR / Great Depression / WWII policies when government became a much larger player as a percentage of economy.

Recessions, while inevitable, as all business cycles are, are much more a function responsive and sensitive to fiscal and regulatory policies than Fed's monetary policies.

16 posted on 01/20/2010 9:46:58 PM PST by CutePuppy (If you don't ask the right questions you may not get the right answers)
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To: CutePuppy
Quote:"What is even more important, is that it's not really the Fed's job (and never has been, to my knowledge) to prevent recessions, not that they could even try with monetary policy."

Actually, and unfortunately, it is a part of the Fed's job to prevent recessions, at least indirectly. You have to actually see it/read it to believe it, because it is one of the most abominable pieces of federal legislation, notwithstanding how short it is, but the The Full Employment and Balanced Growth Act (Pub.L. 95-523, 92 Stat. 1887, enacted October 27, 1978, 15 U.S.C. § 3101–3152, aka the Humphrey–Hawkins Full Employment Act) does require the Federal Reserve to do its part to further four separate (and frequently conflicting) goals: full employment, growth in production, price stability, and balance of trade and budget.

This is another piece of bastardized liberalism of truly epic proportions, signed into law by Obama's role model, Jimmy "I see racist people" Carter, in 1978 (the nadir of American private enterprise and the acme of governmental meddling, interference in, and distortion of, supposedly free markets).

This this is such an atrocious piece of soviet-style communist thinking, that the flavor is best appreciated by a verbatim quotation of the relevant Wikipedia article: Quote:"In response to rising unemployment levels in the 1970s, Representative Augustus Hawkins and Senator Hubert Humphrey created the Full Employment and Balanced Growth Act. It was signed into law by President Jimmy Carter on October 27, 1978, and codified as 15 USC § 3101. The Act explicitly instructs the nation to strive toward four ultimate goals: full employment, growth in production, price stability, and balance of trade and budget. By explicitly setting requirements and goals for the federal government to attain, the Act is markedly stronger than its predecessor. {An alternate view is that the 1946 Act concentrated on employment, and Humphrey-Hawkins, by specifying four competing and possibly inconsistent goals, de-emphasized full employment as the sole primary national economic goal]. In brief, the Act: Explicitly states that the federal government will rely primarily on private enterprise to achieve the four goals. Instructs the government to take reasonable means to balance the budget. Instructs the government to establish a balance of trade, i.e. to avoid trade surpluses or deficits. Mandates the Board of Governors of the Federal Reserve to establish a monetary policy that maintains long-run growth, minimizes inflation, and promotes price stability. Instructs the Board of Governors of the Federal Reserve to transmit an Monetary Policy Report to the Congress twice a year outlining its monetary policy. Requires the President to set numerical goals for the economy of the next fiscal year in the Economic Report of the President and to suggest policies that will achieve these goals. Requires the Chairman of the Federal Reserve to connect the monetary policy with the Presidential economic policy. The Act set specific numerical goals for the President to attain. By 1983, unemployment rates should be not more than 3% for persons aged 20 or over and not more than 4% for persons aged 16 or over, and inflation rates should not be over 4%. By 1988, inflation rates should be 0%. The Act allows Congress to revise these goals as time progresses. If private enterprise is lacking in power to achieve these goals, the Act expressly allows the government to create a "reservoir of public employment." These jobs are required to be in the lower ranges of skill and pay so as to not draw the workforce away from the private sector. The Act directly prohibits discrimination on account of gender, religion, race, age, and national origin in any program created under the Act. The Act quietly expired in 2000. "

While the Act has, technically, expired, it still informs the spirit of much of what the Fed does, and is the sort of socialist pablum that Bernanke was reared on as a young pup at the Fed.

Bottom line is: it shouldn't be the Fed's concern, but the fcuking socialists/communists aka liberals have consistently forced the Fed to have to make it its concern. (and BTW, for topics such as this, I include erstwhile, nominal Republicans such as Nixon in the category of "socialists/Communists aka liberals" because Mr. Nixon, without apparently batting an eyelid, took any number of steps that, today, post-Reagan, would be considered to be the sole purview of the rabid hard left, such as price controls.)

17 posted on 01/20/2010 9:59:54 PM PST by Oceander (The Price of Freedom is Eternal Vigilance -- Thos. Jefferson)
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To: Oceander
atrocious piece of soviet-style communist thinking ... is probably one of the best descriptions of Humphrey–Hawkins Full Employment Act that I've heard.

Hard-coded numbers as percentage goals for inflation, enshrined into law, with no prescription of how any of it can be achieved or what the remedy is if not achieving them, was simply hilarious when I first read it.

Re Nixon, price controls / WIN are just some of the things he messed up in his economic policies.

18 posted on 01/20/2010 10:30:36 PM PST by CutePuppy (If you don't ask the right questions you may not get the right answers)
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To: CutePuppy

Viz. Nixon: Yup. I was actually flabbergasted the first time I started reading up on his actual economic policies and whatnot. Ever since I was little, Nixon was always portrayed as sort of the uber-evil-right-winger/conservative, the hobgoblin/bogeyman that was supposed to be haunting the Reagan years, but it turns out that in many respects his economic policies would be considered to be those of a hard-core flaming left-wing liberal these days.


19 posted on 01/20/2010 10:34:28 PM PST by Oceander (The Price of Freedom is Eternal Vigilance -- Thos. Jefferson)
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To: CutePuppy
Re Nixon, price controls / WIN are just some of the things he messed up in his economic policies.

Yes, President Nixon's wage and price controls were an abomination. If memory serves, though, WIN ("Whip Inflation Now") was President Ford's program.

20 posted on 01/21/2010 5:38:24 AM PST by snowsislander
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To: Comrade Brother Abu Bubba

Or maybe the Feds shouldn’t have been forcing banks to make mortgages to people who couldn’t afford to pay them back, instead of making us pay higher rates to pay for the program.


21 posted on 01/21/2010 6:00:57 AM PST by <1/1,000,000th%
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To: Toddsterpatriot
Interesting analysis, but simply measuring the lengths of recessions is not a great comparison.

For one thing, you are not measuring severity-- the Gould-U.S. Grant scandals which led to a severe downturn in the mid-1870's (arguably the worst recession in the 1857-1912 period) did not even begin to compare to the Hoover-FDR depression six decades later.

For another, you are comparing two entirely different economic structures. Emerging economies typically have more boom and bust cycles (especially the later) than fully developed economies. After 1912, you have an America which is clearly the leading economy in the world and a highly industrialized and diverse economy. From 1857-1912, you have an America which is mainly agricultural, and is emerging as an industrial power, but isn't even close to being the world's top economic power until the end of that era.

This isn't to say that the Fed hasn't done some good, sometimes even by design, but more often by coincidence and the luck of good timing. When they screw up, they tend to screw up big-time such as reducing the money supply at the beginning of the 1930's recession (as it was thought to be at the time) or providing too easy credit prior to the start of the current recession. Much the same arguments can be made about the virtues of planned economies versus free market economies.

Planned economies DO tend to smooth out the economic cycles somewhat. That is, until the planners screw up big time. That being said, would you prefer to live in a nanny state Europe where unemployment, even in good times, is around 10%? Or in a pre-nanny state America where the cycles may be a less predictable but the overall standard of living is far higher?

22 posted on 01/21/2010 6:51:57 AM PST by Vigilanteman (Obama: Fake black man. Fake Messiah. Fake American. How many fakes can you fit in one Zer0?)
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To: Vigilanteman
Interesting analysis, but simply measuring the lengths of recessions is not a great comparison.

Here was your original claim.

Once the Fed seized the role of setting interest rates, downturns can last much longer, sometimes

Here was my response.

I thought the downturns were less frequent and shorter, on average, after the Fed was created compared to before.

It looks like I was right. Do you disagree?

For one thing, you are not measuring severity

If you have that information, I'd like to see it. I think the severity of downturns was also less, on average, since the Fed, but if you can show that's not the case....

23 posted on 01/21/2010 7:00:44 AM PST by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: Toddsterpatriot
Length: As long as your data is valid, then you were right and I was wrong. Feel better now?

Severity: Can you find anything in the 1857-1912 era which even comes close to matching the big one which lasted 1929-1941? Will you now give me the same courtesy which I gave you? Or, are you a proponent of managed economies?

24 posted on 01/21/2010 9:07:19 AM PST by Vigilanteman (Obama: Fake black man. Fake Messiah. Fake American. How many fakes can you fit in one Zer0?)
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To: Vigilanteman
Length: As long as your data is valid, then you were right and I was wrong. Feel better now?

If you learned something, I feel better.

Can you find anything in the 1857-1912 era which even comes close to matching the big one which lasted 1929-1941?

I thought the Panic of 1873 was pretty bad. A 5 year contraction followed 3 years later by a 3 year contraction. The Panic of 1893 led to a 17 month contraction and 18 months later we started an 18 month contraction followed 2 years later by another 18 month contraction followed 2 years later by a 2 year contraction.

I hope you don't think I'm defending the Feds response during the Great Depression. And I'm sure you'll have to admit they haven't made the same mistake since.

Will you now give me the same courtesy which I gave you?

You bet. If you show me that the severity of the contractions after the Fed was created were worse than those before the Fed, I'll be happy to admit you were right.

Or, are you a proponent of managed economies?

Excuse me?

25 posted on 01/21/2010 9:28:00 AM PST by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: ConservativeMind

Financial collapse and recession. Just earlier and shallower.


26 posted on 01/21/2010 9:47:35 AM PST by Brilliant
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To: Toddsterpatriot
It sounds like we both agree that the Panic of 1873 was the worst downturn in the 1857-1912 era. But "pretty bad" still doesn't even come close to describing what happened 1929-1941, does it?

It sounds like you are defending the Fed because they supposedly learned the lessons of the 1930's.

However, just because they haven't duplicated the exact same mistakes doesn't mean that they've made plenty more. Including the current mess which is the topic of this thread.

I'll be the first to admit that free market capitalism is far from a perfect system. But it has a far better track record than any of the alternatives tried thus far.

27 posted on 01/21/2010 10:17:48 AM PST by Vigilanteman (Obama: Fake black man. Fake Messiah. Fake American. How many fakes can you fit in one Zer0?)
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To: Vigilanteman
It sounds like you are defending the Fed because they supposedly learned the lessons of the 1930's.

What do you think the Fed did wrong in the 1930s?

28 posted on 01/21/2010 10:19:19 AM PST by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: snowsislander

You are right, WIN was actually announced by Ford.

http://www.presidentprofiles.com/Kennedy-Bush/Gerald-R-Ford-Congress-inflation-and-energy.html


29 posted on 01/21/2010 11:54:35 AM PST by CutePuppy (If you don't ask the right questions you may not get the right answers)
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To: Toddsterpatriot

Bernake is a joke. Remember the 60 minutes interview with Steve “Softball” Croft a few months ago? When Croft asked him why regualr American taxpayers should bail out Wall St bankers Ben said:

“If your neighbor smokes in bed and starts his house on fire, do you want the fire dept to come or would you rather the whole house burn down?” Softball Steve then changed topics.

The proper response that a REAL journalist would’ve asked is:

“Gee Ben, what if my neighbor wasn’t smoking in bed, but instead dumping gasoline on his house to burn it down and collect the insurance money? Isn’t that perhaps a better anaolgy? Shouldn’t arsonists go to prison instead of collecting money for the havoc they’ve wreaked?”

This bailout/TARP/ Fed secret $$$ printing is a disaster. All of the big banks should’ve been left to fail, the shareholders wiped out, and the buildings/assets/office equipment liquidated at a fire sale. Then the perps should’ve done serious prison time. Make no mistake, we’re back in moral hazard land again and when the CRE and alt-arm loans start resetting (as they are now) we’ll be looking at Bailout 2.0.

Fact is, we overbuilt residential and CRE to an absurd extent and the values of most of these properties will NEVER recover to anything close to what was expected. This economy will continue worsening and by 2012 we’ll be in the iron grip of what trends seer Gerald Celente calls the “Greatest Depression.”


30 posted on 01/21/2010 11:55:24 AM PST by NJ sux
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To: NJ sux
what if my neighbor wasn’t smoking in bed, but instead dumping gasoline on his house to burn it down and collect the insurance money?

It's true that a lot of Americans played with fire when they bought houses they couldn't afford. The government, Bush, Clinton and Congress played a part in that.

Shouldn’t arsonists go to prison

You want to throw defaulting home buyers into prison?

This bailout/TARP/ Fed secret $$$ printing is a disaster.

Why?

All of the big banks should’ve been left to fail, the shareholders wiped out, and the buildings/assets/office equipment liquidated at a fire sale.

Because we know that would have occurred at zero cost to the taxpayer?

Then the perps should’ve done serious prison time.

What did the perps perp that deserves jail time?

Make no mistake, we’re back in moral hazard land again

Obviously banks are climbing all over each other to lend to deadbeat home buyers again.

and when the CRE and alt-arm loans start resetting

Because resetting when rates are at record lows is a bad thing.

31 posted on 01/21/2010 12:08:56 PM PST by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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To: Toddsterpatriot
What do you think the Fed did wrong in the 1930s?

For starters, there was that little problem of reducing the money supply just when liquidity was needed the most. But it did help ensure the election of FDR, so maybe it was intentional.

Just out of curiosity, are you really comfortable having a private, unaccountable group of bankers controlling our monetary system?

32 posted on 01/21/2010 12:57:25 PM PST by Vigilanteman (Obama: Fake black man. Fake Messiah. Fake American. How many fakes can you fit in one Zer0?)
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To: Toddsterpatriot
What do you think the Fed did wrong in the 1930s?

For starters, there was that little problem of reducing the money supply just when liquidity was needed the most. But it did help ensure the election of FDR, so maybe it was intentional.

Just out of curiosity, are you really comfortable having a private, unaccountable group of bankers controlling our monetary system?

33 posted on 01/21/2010 12:58:10 PM PST by Vigilanteman (Obama: Fake black man. Fake Messiah. Fake American. How many fakes can you fit in one Zer0?)
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To: Vigilanteman
For starters, there was that little problem of reducing the money supply just when liquidity was needed the most.

So when the money supply shrank dramatically and thousands of banks failed, the Fed didn't loan to the banks to help keep their doors open? The Fed didn't provide new liquidity to counteract the liquidity drain caused by waves of bank failures?

Just out of curiosity, are you really comfortable having a private, unaccountable group of bankers controlling our monetary system?

Control our monetary system? What do you mean?

34 posted on 01/21/2010 1:15:15 PM PST by Toddsterpatriot (Math is hard. Harder if you're stupid.)
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