“I consider 2008 as a warning signal but not a total collapse-more like a slow death and who knows where we are going now—above my pay grade.”
The recipe for the Fed’s response to 2008 can be found in Milton Friedman and Anna Schwarz’s “A Monetary History of the United States”.
Or more precisely their long chapter “The Great Contraction”
It’s a discussion of the 1930 Fed’s failure to respond to the deflationary spiral hitting the banking system, and what they should have done.
Bernanke is a student of Friedman and Schwarz and he applied their lessons to stave off a similar deflationary collapse. It’s probably the closest that we have come to a repeat of the Great Depression.
The response to this Covid recession is being treated in a similar fashion. Without the stimulus payments the spiraling collapse of demand would be unbelievable.
The response to this Covid recession is being treated in a similar fashion. Without the stimulus payments the spiraling collapse of demand would be unbelievable.
*****************************************************************************
I get that. But I don’t see what they are going to do about all the huge debt. And stocks with a PE of 83? Hard for a value investor like me to see any fundamentals that make sense these days.