Thursday, February 27, 2014

Matthew O'Brien — How the Fed Let the World Blow Up in 2008


This is convincing that letting the central bank set the interest rate is insane. Reading the Fed minutes with hindsight, these people had no clue and were paralyzed for action in the face of an emergency. It makes a good case for the soundness of Hayek's The Uses of Knowledge in Society.

The Atlantic | Business
How the Fed Let the World Blow Up in 2008
Matthew O'Brien

6 comments:

googleheim said...

Rigging the LIBOR interest rate is so totally American so totally free market so totally honest.

Baseball hot dogs apple pie and LIBOR rigging

Michael Norman said...

Couple the shocking behavior of the Fed with Paulson's, "I went home and prayed," (then Treasury Secretary Paulson's words at the time of the crisis, from his book, "On the Brink") and you get a clear sense that all the supposed, "Masters of the Universe," are a bunch of morons.

Matt Franko said...

Here's Mike chronicle of events from back then... pretty prescient:

http://mikenormaneconomics.blogspot.com/2008_09_01_archive.html

Tom Hickey said...

The really crazy thing is that the price inflation they were expecting was from oil price pass through when that is cost push rather than demand pull and the cost is a monopoly price. The Fed was standing by ready to contract the US economy in order to force the Saudi's to lower their price due to weaking global demand?

googleheim said...

QE is stimulus ??

"cutting stimulus" by tapering QE should be oppositely worded !!

From Mosler's blog :

Fed should be ‘very patient’ in cutting stimulus: Rosengren (Reuters) The high number of part-time workers who would rather work full-time, the still-high unemployment rate, and very low inflation suggest significant “slack” in labor markets and “call for a very patient approach to removing monetary policy accommodation, particularly given the softness in recent economic data,” Boston Federal Reserve Bank President Eric Rosengren said. Rosengren said that it has been difficult for economists to determine whether weak employment reports for the past two months have been influenced bad weather or if they reflect an economic slowdown, and predicted that harsh winter weather will make the February jobs report similarly difficult to interpret. “In my view, this uncertainty provides an additional strong rationale for taking a patient approach to removing the monetary policy accommodation that the Federal Reserve has been deploying.”

Tom Hickey said...

It's the magic wand theory.