How the Fed Let the World Blow Up in 2008

[xchrom]

http://www.theatlantic.com/business/archive/2014/02/how-the-fed-let-the-world-blow-up-in-2008/284054/

?n1mjot


It was the day after Lehman failed, and the Federal Reserve was trying to decide what to do.

It had been fighting a credit crunch for over a year, and now the worst-case scenario was playing out. A too-big-to-fail bank had just failed, and the rest of the financial system was ready to get knocked over like dominos. The Fed didn't have much room left to cut interest rates, but it still should have. The risk was just too great. That risk was what Fed Chair Ben Bernanke calls the "financial accelerator," and what everyone else calls a depression: a weak economy and weak financial system make each other weaker in a never-ending doom loop.

But the Fed was blinded. It had been all summer. That's when high oil prices started distracting it from the slow-burning financial crisis. They kept distracting it in September, even though oil had fallen far below its July highs. And they're the reason that the Fed decided to do nothing on September 16th. It kept interest rates at 2 percent, and said that "the downside risks to growth and the upside risks to inflation are both significant concerns."

In other words, the Fed was just as worried about an inflation scare that was already passing as it was about a once-in-three-generations crisis.

[Egalitarian Thug]

1. Is there any doubt that these parasites screwed the world and got away with it?

& R

[lostincalifornia]

2. The feds did NOT blow up the world in 2008. Years of deregulation, fraudulent loans, and other

recklessness were the main causes

[Laelth]

3. Hear, hear!

The Fed has been fighting against reduced government spending. The Fed actually tries to fulfill its mandate--to grow the economy slowly and safely. In order to do so, they have had to try to counter spending cuts demanded by Congress. Throughout this recession, the Fed has been "the good guys." It's the Republicans in Congress who continue to try to strangle both the government and the economy in order to drive down wages and increase corporate profits.

-Laelth

[lostincalifornia]

4. I agree