Don't forget who we are dealing with....
http://www.washingtonpost.com/wp-dyn/content/article/2006/05/23/AR2006052300642.html
http://www.washingtonpost.com/wp-dyn/content/article/2006/05/23/AR2006052300642.html
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
Ben Bernanke: Someone pay him to go & study the Great Depression or do anything else
- Thread starter ByLoSellHi
- Start date
Although creative and never before used, Bernanke's tactics were useful in solving a problem the Fed didn't have the tools to solve. With banks lacking capital to "lubricate" the economy the liquidity injections and monetary auctions supplied the banks with the required capital to sustain normal business. This is one of the most widely accepted causes of the Great Depression. When the banks were lacking capital the Fed was not allowed to act letting the economy fall even further into decay. If the Fed then had acted as Bernanke had acted today the Great Depression may have only been been a Mild Recession. The similarities between the two periods are stunning except for when it comes to Fed intervention. Most economists who believe in Keynesian Theory wouldn't liken it to central planning. I hope this helps in your understanding of economic theory.
BuyLoSellHi, you seem to be an astute trader but in this case your vehemence against Bernanke's actions seems largely unfounded. The Fed's actions have increased some kinds of risk but have also greatly reduced or at least staved off others.
Consider this article "Partying Like Itâs 1929"
http://www.nytimes.com/2008/03/21/opinion/21krugman.html
I would also note that anyone who has studied the Great Depression in depth would be a lot more skeptical of the free market and classical "laissez faire" economics in general.
Consider this article "Partying Like Itâs 1929"
http://www.nytimes.com/2008/03/21/opinion/21krugman.html
I would also note that anyone who has studied the Great Depression in depth would be a lot more skeptical of the free market and classical "laissez faire" economics in general.
If you believe a total collapse of Bear Stearns would have thrust people all over the world into a run on banks, then Bernanke deserves a cookie.
I do not believe it. There would have been spillover pain, and further stresses on the banking system, but it would have forced investors, depositors and financial institutions to bite the bullet and re-familiarize themselves with that very necessary concept of risk management.
I believe Bernanke merely punished savers, rewarded rampant speculators, and delayed what will ultimately be a necessary cleansing of financial markets, and ensured that banks will reign in stimulative consumer lending and leveraged loan activity (ask Fortress or Blackrock) for a much longer period of time - banks have become gun shy to the extreme.
Also, Bernanke has ensured all Americans that by the time we see higher interest rates (which we will), they will be a much larger shock to the system.
He is probably hoping someone else has to deal with the aftermath of his actions, as our good buddy Alan Greenspan did.
I do not believe it. There would have been spillover pain, and further stresses on the banking system, but it would have forced investors, depositors and financial institutions to bite the bullet and re-familiarize themselves with that very necessary concept of risk management.
I believe Bernanke merely punished savers, rewarded rampant speculators, and delayed what will ultimately be a necessary cleansing of financial markets, and ensured that banks will reign in stimulative consumer lending and leveraged loan activity (ask Fortress or Blackrock) for a much longer period of time - banks have become gun shy to the extreme.
Also, Bernanke has ensured all Americans that by the time we see higher interest rates (which we will), they will be a much larger shock to the system.
He is probably hoping someone else has to deal with the aftermath of his actions, as our good buddy Alan Greenspan did.
I definately agree with the fact that Greenspan holds a lot of the blame here. The thing I will not concede on is that Bernanke is playing the same game. He is not simply saving the system to play another day. He saved the system and is getting the ball moving on regulation to keep this from happening again. The situation in the 1920's is the same thing. There was a long period of little to no regulation on lending practices that led to a mass amount loan defaults that kept banks from doing business. I firmly believe that Bernanke's actions have staved off such an event and that a little regulation will keep such an event from happening again. Were people that made risky bets kept protected from their deserved pain... Yes. But was that intervention necessary to preserve the broader economic picture... Yes!
Were you trading in 2001 and 2002?
Quote from bkveen3:
I definately agree with the fact that Greenspan holds a lot of the blame here. The thing I will not concede on is that Bernanke is playing the same game. He is not simply saving the system to play another day. He saved the system and is getting the ball moving on regulation to keep this from happening again. The situation in the 1920's is the same thing. There was a long period of little to no regulation on lending practices that led to a mass amount loan defaults that kept banks from doing business. I firmly believe that Bernanke's actions have staved off such an event and that a little regulation will keep such an event from happening again. Were people that made risky bets kept protected from their deserved pain... Yes. But was that intervention necessary to preserve the broader economic picture... Yes!
Quote from makloda:
Believe it now, after Lehman?
I am to give you a 'no bullshit' answer.
Maybe.
By the time Lehman was de facto dead, the dynamics had completely changed, and there was WAY more armageddon and panic than at the time Bear Stearns collapsed.
To compare the two time periods, and then make a deduction about whether Benny did the right or wrong thing purely based on the behavior in the wake of Lehman's fall is not a fair comparison.
I still lean heavily towards the overall belief that Bernanke has mismanaged and mangled things very badly.