In A Sudden Twist, A New Group Of Economists Are Blaming Bernanke For The Great Recession

TBI - The Telegraph (UK) ^ | 9-24-2012 | Ambrose Ecans-Pritchard

[blam]

In A Sudden Twist, A New Group Of Economists Are Blaming Bernanke For The Great Recession

Ambrose Evans-Pritchard
The Daily Telegraph (UK)
September 24, 2012, 4:51 AM

Monetarists from across the world can mostly agree on one thing. The US Federal Reserve caused the Great Recession.

Fed chair Ben Bernanke kept policy far too tight after the US economy buckled in early to mid 2008. He allowed a collapse in the money supply to run unchecked, causing avoidable disasters at Fannie, Freddie, Lehman, and AIG later that year.

Call it the "Bernanke Depression" if you want, a term gaining traction in elite circles. The indictment is a little unfair. The European Central Bank was worse. It raised rates into a deflationary oil shock in August 2008, and worsened a run on the dollar that constrained Fed actions.

There was little that Bernanke could do about the deeper causes of the crisis, whether the `Savings Glut' of Asia and North Europe, the `China Effect', the $10 trillion reserve accumulation by the world's rising powers.

Yet three heavyweight books now lay the blame squarely on the Fed: the 'Great Recession' by Robert Hetzel, a top insider at the Richmond Fed; 'Money in a Free Society' by Tim Congdon from International Monetary Research; and 'Boom and Bust Banking: The Causes and Cures of the Great Recession' by David Beckworth from Western Kentucky University.

They do not agree on everything. Hetzel denies that there was a serious debt bubble before the crisis. Beckworth and Congdon think there was, and I am with them. Total debt levels in the OECD club of rich states rose from 167pc of GDP to 330pc in thirty years. This was the blow-off phase of a Kondratieff debt cycle. The system was primed for a crisis.

(snip)

[MrB]

Couldn’t blame 0bama... that might be... RAAAYYYY SISSS!

[yldstrk]

better than blaming obama communism because that would be controversial

[Zakeet]

See tag line also

[bert]

Barney Frank , the Queeah from Massachusetts, and his comrade Chris Dodd are the real culprits. They set up the institutions that failed from the inside out.

The only Democrat to be punished was Eliot Spitzer.He was done in by Hank Greenberg for destroying AIG by allowing it to become the facilitating tool for Frank and Dodd .

[joe fonebone]

do not forget that the pubs held the house and senate during the frank clusterf..k...

they stood by and did NOTHING to stop this from happening, hell even dumbass mccain saw this and tried to get the pubs to stop it, and they would not..

this is not a dem recession, nor is it a pub recession..

it is a career politician caused recession, and poor ol’ bernanke was caught in the middle, trying to right a listing ship....

[Praxeologue]

it is a career politician caused recession

Then why was McCain sounding the alarm?

The culprit is the American Left, represented in Congress by the Democrats and the left wing of the Republicans, in this case excluding McCain.

[The Sons of Liberty]

Benanke and Hussein are working together, and together they are destroying the economy so that NONE of US will be working!

[txrefugee]

Bernanke is an academic who has no clue about business. Why do we think someone with such an insular background should have the levers of economic power?

[Fee]

Congress did not originate liar loans, pressured rating agencies by threatening non cooperating analysts to rate mortgage backed securities riddled with liar loans as AAA and publishing it in the perspective to investors and pension funds. If banks did not encourage applicants to lie, refuse to verify applicants info because they were in a rush to sell the mortgage to the fed gov within six months (the fees and points collect in that short period outdid yields in other investments). Bankers used the gov loophole to crank out as many loans (disregarding applicant info) so they can collect the fees and points in the shortest time possible. Consequences toxic loans were brought by the gov, sold to investors and pension funds. When the bubble popped, under normal circumstances the economy would recover within two years, instead the toxic assets in the system made it worst then normal. Add into the mix the highly leveraged but secretive derivative trading, black pools and etc, the collapse and the unpaid debts are so huge due to lack of fed monitoring and regulations, the losses now threaten the entire global financial system and with it the fabrics of civilization. Fed Reserve, Wall Street bankers and gov are all to blame. Before the Dems celebrate this post info claiming it is capitalism and GOP, they did not make it any better under Obama by saddling the US gov with over 5 trillion in additional debt.

[Praxeologue]

The only Democrat to be punished was Eliot Spitzer.

Three cheers for Greenberg!

The left destroyed his life's work.

Hank realized that he needed to do the job himself. How many other billionaires show this kind of flint?

[palmer]

Fed chair Ben Bernanke kept policy far too tight after the US economy buckled in early to mid 2008. He allowed a collapse in the money supply to run unchecked, causing avoidable disasters at Fannie, Freddie, Lehman, and AIG later that year.

That is utterly ridiculous. The reason why the economy tanked is because the bubble popped, and Bernanke could push the string all he wanted and not stopped it. The reason why the Great Recession has turned into the longest recession since the depression (and it's a depression in some areas) is that Bernanke is far too loose trying to prop up a failed asset bubble rather than let it collapse so we can start over. Bernananke's only concerns are the banks. He will continue his insane policy of propping them up with carry trade deals and asset inflation until the day he is fired. Then perhaps we will have someone with enough sanity to realize that growth comes from long term investment (i.e. sound money) not asset bubbles in the market or real estate or zombie banks with cash flow from carry trades.

[MrB]

They seek to destroy us so that their utopia can be implemented.

[palmer]

I agree with your assessment, but we would have recovered in less than two years minus a few large banks and a couple trillion in federal money to pay the FDIC losses. Also Bernanke wants rates low so the politicians can keep borrowing and spending and pretending we can pay it back.

[TEXOKIE]

bttt

[Praxeologue]

Congress did not originate liar loans, pressured rating agencies by threatening non cooperating analysts to rate mortgage backed securities riddled with liar loans as AAA and publishing it in the perspective to investors and pension funds. If banks did not encourage applicants to lie, refuse to verify applicants info because they were in a rush to sell the mortgage to the fed gov within six months (the fees and points collect in that short period outdid yields in other investments). Bankers used the gov loophole to crank out as many loans (disregarding applicant info) so they can collect the fees and points in the shortest time possible. Consequences toxic loans were brought by the gov, sold to investors and pension funds. When the bubble popped, under normal circumstances the economy would recover within two years, instead the toxic assets in the system made it worst then normal. Add into the mix the highly leveraged but secretive derivative trading, black pools and etc, the collapse and the unpaid debts are so huge due to lack of fed monitoring and regulations, the losses now threaten the entire global financial system and with it the fabrics of civilization. Fed Reserve, Wall Street bankers and gov are all to blame.

All of which was the market responding to government interference, regulations and political bullying.

Neither the market nor the Fed is responsible for this depression. The political left is responsible.

Bernanke has Hobson's Choice. He must fund the $1.0+ trillion per year deficits run up by the President and Congress, since the credit markets will not. He is buying time until the President and Congress reduce the deficit. Politicians look at this moral hazard as an opportunity to pass the buck to the Fed. The chance of any significant deficit reduction is therefore slim. We are therefore headed down a long path of debasement.

Don't ask either Bernanke or Boehner to shut down the government. Only the voters can do that.

[Wuli]

but wait a minute

isn’t a “fact” that “smart” people in charge of agencies like the Fed have no possible responsibility in creating economic boom-and-bust cycles, which are totally the fault of “free markets”, and which call for increasing the powers of agencies like the Fed, not blaming them!!!!!! /sarc