Learning the Wrong Lessons … Again
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This New York Times review
of the Federal Reserve’s 2009 transcripts provides ample evidence that, as
was the case for the Great Depression some 80 years prior, the wrong lessons
are being learned from the financial crisis and the Great Recession it
spawned.
When Ben S. Bernanke walked into the Federal Reserve’s ornate boardroom in
December 2009, the officials who were gathered around the long table gave the
Fed’s chairman a standing ovation.
Mr. Bernanke had just been crowned Person of the Year by Time magazine.
The recession had ended, unemployment had crested and Mr. Bernanke was widely
regarded as singularly responsible.
But the return to normalcy that Mr. Bernanke and his committee
began to chart at that end-of-the-year meeting soon proved premature. The Fed
had arrested the financial crisis, but the moment would also turn out to be
the beginning of a yearslong series of failures to provide a
sufficiently large dose of stimulus to restore the battered American economy
to its previous health.
Then again, maybe it’s just me…
I’ve always assumed that an economy and financial system that lurched from
one central bank enabled asset bubble to another wasn’t “normal” when, in
fact, maybe it is.
It appears that the lesson being learned over the last six years is that,
unlike the internet stock bubble-to-housing bubble transition, the Fed just
didn’t do enough to facilitate the housing bubble-to-whatever we end up
calling the next bubble transition.
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