Skip to comments.Fighting this Depression with the Last Depression's Tactics is a Recipe for Disaster
Posted on 07/07/2012 4:24:57 AM PDT by OwenKellogg
In Chairman Bernanake's doctoral thesis, he "focused on the role of monetary policy in affecting economic activity, and on the historical analysis of the causes of the Great Depression." His thesis and resulting understanding of the negative impact that uncertainty has on business cycles should provide insight on the actions needed by government to resolve our current economic difficulties. In short, Dr. Bernanake understood that "[i]t is shown that increased uncertainty provides an incentive to defer such investments in order to wait for new information" (page 2 of the dissertation). In the same paper, he wrote, "Uncertainty is seen to retard investment independently of considerations of risk or expected return. Introduction of uncertainty can be associated with slack investment, resolution of uncertainty with an investment boom."
The Federal Reserve can change all of that, and very quickly. The Federal Reserve is enabling this administration to be fiscally irresponsible with its unrealistically low interest rates. Be it Quantitative Easing 1, Quantitative Easing 2, or Operation Twist and its successor, the implications of a loose monetary policy enables our federal government not to solve the problem.
Should the Federal Reserve not exercise its leadership responsibility, the last vestige of hope will be when Congress faces raising the debt ceiling, but by then it may be too late. The time to act is now. The Federal Reserve must remove all uncertainty by showing our citizens and the world that we are serious about instilling fiscally responsible behavior. The Federal Reserve must stop this loose monetary policy philosophy. It's the uncertainty, stupid! Solve the problem!
(Excerpt) Read more at americanthinker.com ...
From today’s cnbc.com:
Uncertainty about U.S. fiscal policy, Europes sovereign crisis and slower global growth have turned the U.S. economy into what feels like a slow-moving zombie, leaving businesses and consumers hesitant and reluctant to act.
Those factors combined to hit business confidence and have led to slower activity, evident in Fridays report showing just 80,000 new jobs created in June. That follows a sluggish 77,000 payrolls in May and 68,000 in April, making the second quarter the worst quarter for jobs in two years.
That report sparked immediate market talk of a new round of asset purchases or quantitative easing by the Fed, but the number was not weak enough to generate a clear consensus on when or whether the Fed would act.
Signs We Are Approaching a Zombie Economy
The article makesa good point, however the real problem iis brenanke is doing the best he can while the president and Congress is not doing their job. Specifically the Reid has blocked every piece of legislation that has passed the House.
I have to wonder how many jobs were actually created in June. Remember every job creation report for the last year or so have been revised, downward, about a week after their initial release. So, I wonder what the “80,000 new jobs” is going to turn into about July 15th. Any bets on how low the revised numbers will be?
A very good article, as well as the comments there that follow it.
One of the things ROn Paul had correct is to audit the Federal Reserve.
I agree that uncertainty is contributing to the problem, but low interest rates are not creating the uncertainty. The federal government (in particular Obama) is creating the uncertainty because everyone is running around worried sick about what crazy freaking thing the 1st affirmative action idiot president might do next, and how what he has already done (ie. Obamacare) will affect them.
All low interest rates does is make people less likely to stash their money in a CD or savings account and instead invest it in something with a decent return on investment. Heck I would go so far as to say that keeping interest rates low is the ONLY thing Obama has done right.
The first place to instill fiscally responsible behavior is at the banks. Want to see a sh!t storm? Allow rates to rise and force the banks to mark to market. Still waiting for someone to go to jail for 2008.
The Great Depression was in fact only Great because of Keynsian government reaction.
Roosevelt spent like a drunken sailor and only made it worse. The greatest con job in history was the notion that Roosevelt protected people by giving them jobs. He crushed any chance of them getting a real middle class job and then let them go cut bushes on government land for room and board.
He crushed any chance of them getting a real middle class job and then let them go cut bushes on government land for room and board.
Obama let them go work for green energy companies and then get tossed out in the street again.
I agree that uncertainty is contributing to the problem, but low interest rates are not creating the uncertainty.
But the Fed’s low interest rates (manipulated below the market rate) allows the administration to get away with bad behavior. The Fed is “enabling” the adminstration’s policies of uncertainties — that’s what I think Colonel Ryan is alleging.
I would also like to see Jon Corzine behind bars.
I think he should be personally liable monetarily. It would hurt more than jail if Big Jon was down to his last $10 million and had to live like a one-percenter instead of a .01 percenter. I also think it's real justice, rather than just "economic justice"--a term I can't stand.
Corzine signed off on the company's controls of segregated money, and he was personally responsible for the investment policies which lead to the disaster, persuading the board and over-ruling the company's risk officer. On the segregated money--anyone who has had any fiduciary experience--lawyer, broker, investment bank big-shot--has it drummed in from day one that segregated funds are sacred and not to be touched. He knew it, and he ran a company where they kept track of what was segregated on a manually updated spreadsheet!
Cut taxes, don't raise them. Open oil drilling. Create jobs.
They are doing the wrong things so often I now conclude they are tubing America deliberatey while they talk the talk to get the Kenyan re-elected illegally..
Fighting the LAST depression with the last depression’s tactics WAS a disaster. The New Deal and other government interventions extended and made the depression deeper.
Alas, Obama will NEVER accept such changes....
how many of those were govrnment jobs?
how many of those were govrnment jobs?
I think very soon the Federal Reserve is going to warn President Obama that the ONLY way to get the US economy going again ....
The Fed has the clout to make Obama change his policies. A simple move to interest rates that price in default risk would get the rational person moving in the right direction.
But like you, I don’t think Obama wants that kind of change. The end result will be very messy if we don’t get the House and the Senate in November.
How long now since the Senate has Produced a Budget?