In recent months, the noisiest and nastiest criticism of the Fed has come not from politicians, but from Wall Street money managers and pundits.
Comment: The following paper analyzes the current U.S. financial crisis, comparing it to other recent crisises in advanced economies.
http://www.economics.harvard.edu/faculty/rogoff/files/Is_The_US_Subprime_Crisis_So_Different.pdf
It identifies a number of factors that I don't remember Mr. Samuelson discussing, despite his incessant moralizing.
Comment: Robert Samuelson is resorting to scary movies of inflation during the 1960s and the 1970s to argue that somehow the Fed should desist from any monetary stimulus. 6 months is not a small time, and bad market sentiment for 6 months can easily spiral downwards into a long-lasting recession. As John Maynard Keynes said back in the 1930s - " In the long run, we are all dead ". Inflation has been below 5% throughout the Bush years, and there is no need for alarm on that front. If we fall victim to Samuelson's scare-mongering about inflation, we may well let the economy slide into recession when a few timely monetary kicks are just what the doctor has ordered, as opposed to quacks like Samuelson.
Comment: Robert Samuelson is resorting to scary movies of recession during the the 1960s and the 1970s to argue that somehow the Fed should desist from any monetary stimulus. 6 months is not a small time, and bad market sentiment for 6 months can easily spiral downwards into a long-lasting recession. As John Maynard Keynes said back in the 1930s - " In the long run, we are all dead ". Inflation has been below 5% throughout the Bush years, and there is no need for alarm on that front. If we fall victim to Samuelson's scare-mongering about inflation, we may well let the economy slide into recession when a few timely monetary kicks are just what the doctor has ordered, as opposed to quacks like Samuelson.
Comment: Comment: http://www.newsweek.com/id/97041
Posted By: eddiewhere @ 01/23/2008 1:24:23 AM
Comment: : Sometimes we have to let PRICES RISE it is a healthy thing. A Person who never gets sick can never build up an immune system to fight future more devestating viruses. It is not good to get sick all the time but it part of our biological developmet. PRICE CONTROLS ARE BAD WHY? Any price control below market rates and/or the expenditure of national savings (financial reserves) to hold down monetary devaluation are inflationary. Price controls and the expenditure of financial reserves subsidize inflationary levels of demand and prevent increases in supply. They make it much more difficult - much more painful - to bring inflation to a halt and restore healthy and sustainable economic growth.
Monetary inflation is a TAX used by governments to expand the money supply and transfers wealth from its people to itself.
Even when there is little "price" inflation, stable prices just mean that governments, by printing more money or otherwise expanding the money supply ("monetary inflation"), has appropriated for itself all the benefits of each year's increase in productive efficiency.Therefore the measures used to hold down price increases are actually additional forces or causes behind inflation, that will cause even further price increases in the future.
"Our country is too large to have all its affairs directed by a single government. Public servants at such a distance, and from under the eye of their constituents, must, from the circumstance of distance, be unable to administer and overlook all the details necessary for the good government of the citizens; and the same circumstance, by rendering detection impossible to their constituents, will invite public agents to corruption, plunder and waste." --Thomas Jefferson to Gideon Granger, 1800. ME 10:167
"I consider the foundation of the Constitution as laid on this ground: That "all powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States or to the people." [X Amendment] To take a single step beyond the boundaries thus specifically drawn around the powers of Congress, is to take possession of a boundless field of power, no longer susceptible of any definition." --Thomas Jefferson: National Bank Opinion, 1791. ME 3:146
Comment: The Fed really doesn't have much choice but to cut interest rates. No matter what the reason, with 50% of Americans invested in the stock market, as the market tanks, people are seeing their 401Ks go down. Combine that with a decrease in housing prices and people are not going to feel very wealthy, and therefore, will lead to lower consumer confidence. This will lead to lower consumer spending. So the Fed cannot let things spiral out of control, in spite of Wall Street's over reaction.
Comment: On May 16, 2006, Fed Chairman Ben Bernanke gave a speech at the 2006 Financial Markets Conference where he was responding to evidence of a surging crisis in credit markets. He said "The concern arises because, all else being equal, highly leveraged investors are more vulnerable to market shocks."
He then explained that the Fed did not actually know the extent of the crisis,
"Concerns about hedge fund opacity and possible liquidity risk have motivated a range of proposals for regulatory authorities to create and maintain a database of hedge fund positions. Such a database, it is argued, would allow authorities to monitor this possible source of systemic risk and to address the buildup of risk as it occurs...".
That database did not exist. So from a strictly factual point of view, Jim Cramer's statement that "they know knothing" has some basis in fact, within the strict context of the August 2007 liquidity crisis.
Unfortunately, the blame for the lack of reliable public financial reporting should placed at the door of real financial journalists, but you are at least correct that the financial "echo chamber" has made it hard to learn the truth.
Comment: RE: Holly Garfield - " The danger of inflation ir real, but we're under 2.5%."
What planet are you living on ?! Sure, you can still buy electronics and other non-essentials on the cheap, but the things that count - like food and energy - are going through the roof.This is why inflation is killing the middle class.Until the government admits this, nothing will be solved by continuing to prop up wall street by artificially reducing interest rates, thereby creating more inflation.
Comment: I would like to caution that inflation is not
Comment: I read this article to be 'Wall St.centric.' The danger of inflation ir real, but we're under 2.5%. Unemployment is 5% and holding. The danger on Monday was of the global markets destabilizing. We are now in a situation where the Shanghai, Hong Kong, Singapore, Seoul, etc. markets are the key. We now have a global economy, and we are the driver of the emerging markets. A small change in our economy will give a magnified difference in emerging market economies which depend on our growth to continue. These economies are fragile, but also the manufacturing centers of the world. That was the message on Monday, and this message had been coming, but unheard, since November. We can live with 3% inflation, but the world cannot live with a US recession. That is the message that Ben Bernake was finally getting on Monday. We must get away from the view that we stand alone. There are billions of people depending on us, and we CANNOT change that. We are the world's economic superpower and Washington, Wall St. and journalists must start actling like it. That is what Ben Bernake did on Monday, and nothing else. Now it is your turn to start mentioning the whole story. The people of the world are depending on the US journalists to bring them in to the picture. They are already here, and they need you to act that way. As Monday showed, 'failure is not an option.'
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