Posted on 08/07/2011 4:51:11 PM PDT by mlocher
SINGAPORE (Reuters) - Federal Reserve Chairman Ben Bernanke, an expert on the Great Depression, once promised that the central bank would never repeat its 1937 mistake of rushing to tighten monetary policy too soon and prolonging an economic slump.
He has been true to his word, keeping interest rates near zero since late 2008 and more than tripling the size of the Fed's balance sheet to $2.85 trillion. But cutbacks in government spending may end up having a similarly chilling effect on the economy, and there is little Bernanke can do to counter that.
Back in 1937, the U.S. economy had been growing rapidly for three years, thanks in large part to government programs aimed at ending the deep recession that began in 1929.
Then the central bank clamped down hard on lending, and federal government spending dropped 10 percent. The economy contracted again in 1938. The jobless rate soared.
"Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again," Bernanke said back in 2002 at a conference honoring legendary economist Milton Friedman's 90th birthday.
Bernanke convenes the Fed's next policy-setting meeting on Tuesday, facing growing concern that the United States may be slipping into another recession while Europe staggers toward a deeper debt crisis. Standard & Poor's decision on Friday to lower the U.S. credit rating adds yet another element of uncertainty.
His options are limited.
Nigel Gault, chief U.S. economist at IHS Global Insight, said the Fed could promise to keep interest rates near zero or its balance sheet swollen for even longer than investors anticipate. Or it could buy even more U.S. government debt.
(Excerpt) Read more at news.fidelity.com ...
We had way better movies in 1937.
bernanke is a great disappointment.
It prolonged the depression by a decade. Everything went stagnant.
Well, now I know never to use Fidelity for any investments.....
Only Pearl Harbor saved FDR’s commie ass.
If we were talking new deal style infrastructure construction, this would be a completely different matter. Instead, it's massive spending to just tread water. Minor road improvements, massive payouts to keep people out of the labor force, wholesale giveaways of the public dollar, and nothing being created.
We've got California's central valley, after record snow-pack, turning into a dust-bowl to protect some species of fish that changed habitat long ago. We've got aging nuclear plants not being replaced, coal power plants being legislated out of existence, a hammerlock on new development of fossil fuels, and a dogged determination to force ‘energy efficiency’ on the public, rather than letting the market decide.
While I dislike the method used in the New Deal, the benefits of that spending is all around us today. Whereas the stimulus spending has never really had an effect on anything, nor was anything of lasting consequence developed other than the largest runup of debt ever.
If you took liberalist ideas and actually ran with them, we'd have something to show for them. We could have put twenty thousand young people through medical school to replace all the doctors who are quitting over Obamacare. We could have reformed the confiscatory nature of the tort system and the wholesale grabs of wealth by the courts without legislative consent, but we didn't. All in all, in Obama's first two years, he had a blank check and he squandered it away to union and government drones. Even this 'Republican' congress would have given him most anything he wanted, and all that was done was massively expensive vacations on the public dollar.
Obama, we are in your debt, up to our eyeballs. Now go celebrate it with a vacation. Worst Present ever.
There are no cutbacks to gov’t spending.
All that WW II expense was funded by government debt — by a government nowhere near in hock as we are today. Who would loan the gov’t the money to fight another big one? Especially w interest rates at zero.
And that is the rub. I keep reading about all these drastic cutbacks.....there are absolutely none.
duplicate
NOPE Felling like 1860 all over again. Is it me or is it getting more and more like 1860. We have been in a cold Civil War that is rearing to go hot any minute.
There will be cutbacks. Not sure it’ll be intentional.
“We had way better movies in 1937.”
My 9-year old son has been falling asleep listening to my Edgar Bergen Charlie McCarthy old time radio shows this last week. He very well could be a child his age in 1937 - laughing it up at Mortimer Snerd while his Dad’s retirement savings get eaten up.
About “ten percent of me” wants to put my freeze dried food, some water, my gun and ammo in the SUV and head for the hills. I’m truly am afraid of what’s going to happen tomorrow.
Gasparino on FOX had a very worried look on his face. And all the other media is trying their best to paint a pretty picture.
That’s what I said! If $28B decreased spending next year is a ‘massive cut’, we’re in deep trouble.
Prepare accordingly.
I hope my Seabee training helps me to “can do”. May have to “com-shaw” some stuff.
I read your profile and know you’re weren’t seabee. But you’re navy and that’s good enough for me.
They also don’t mention the interest on excess reserves program which negates a large part of the base expansion. But who really cares that it caused such a mess in the 1930s that congress banned the practice.
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