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...
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.
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.
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.
If this is true, why does Rogers like China so much?
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
The amount the Fed and U.S. agencies have lent, spent or guaranteed has fallen 15 percent since September to $8.2 trillion, the lowest in a year, based on data compiled by Bloomberg. Spending on infrastructure, tax breaks and other fiscal measures account for 52 percent of the total, up from 39 percent in March, as central bank loan programs are phased out. The change marks a new phase of public intervention in the economy. Congress and the administration’s $4.2 trillion portion, which amounts to 30 percent of everything produced in the country this year, also complicates any future exit strategy. It may be tough for elected officials to quit spending, prolonging the bailout and adding to the federal budget deficit. ..... Congress and the Obama administration are taking a bigger role in the rescue of the economy from the Federal Reserve, shifting the strategy to stimulus spending from central bank lending.
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 “Supervision, regulation of the financial system is the strongest, most effective” way to deal with bubbles, he said in response to a question at a Senate Banking Committee hearing considering his nomination to a second term. “I do not rule out using monetary policy if necessary, if that situation does become worrisome and threatening.” ..... Federal Reserve Chairman Ben S. Bernanke said he doesn’t rule out using monetary policy to pop asset-price bubbles, while stressing that financial regulation is his preferred approach.
Bernanke Says Regulation Came ‘Too Late’ to Curb Housing Bubble - BL, 2010 January 04, by Scott Lanman
..... The standard Taylor Rule would have recommended that the Fed raise the rate to a range of 7 percent to 8 percent through the first three quarters of 2008, “a policy decision that probably would not have garnered much support among monetary specialists,” Bernanke said. A variation of the rule used by the Fed focused on anticipated rates of inflation, not actual rates, he said.
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.