Bernanke: We (the Federal Reserve) caused the Great Depression

[linusPAULing]

"Let me end my talk by abusing slightly my status as an official representative of the Federal Reserve," he said. "I would like to say to Milton and Anna: Regarding the Great Depression. You're right, we (the Federal Reserve) did it. We're very sorry. But thanks to you, we won't do it again."


http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2008/10/12/MNJ013F0VO.DTL&type=printable

The Chronicle spins the role of the Fed of course, but we must remember, it was the Fed that set the interest rates to stupidly low that the home mortgage industry had to invent new ways of lending all the available credit.... how could anyone possibly argue that the Fed isn't directly responsible for this entire mess? So much for "not doing it again"!

 

[awake]

What a heart warming apology; Too bad they still have to be dismantled....

 

[ashura]

You don't understand, although he points the finger at the Fed like we all do, his reasoning for it is all wrong. He believes the Fed should have done MORE prior to the Depression by keeping a constant money supply expansion (which is what he's doing now). He's saying sorry for all the wrong reasons.

 

[ghengis86]

You don't understand, although he points the finger at the Fed like we all do, his reasoning for it is all wrong. He believes the Fed should have done MORE prior to the Depression by keeping a constant money supply expansion (which is what he's doing now). He's saying sorry for all the wrong reasons.

Exactly. Bernanke is under the opinion that the FED did not do ENOUGH! He thought the FED should have done more money and credit pumping. Although its interesting and amusing, he still doesn't understand. however, most sheeple don't know this, so maybe we could use it in our day to day education of people?

 

[linusPAULing]

You don't understand, although he points the finger at the Fed like we all do, his reasoning for it is all wrong. He believes the Fed should have done MORE prior to the Depression by keeping a constant money supply expansion (which is what he's doing now). He's saying sorry for all the wrong reasons.

I'm pretty sure I understand.

The Fed set unnaturally low interest rates prior to the great depression, except they manipulated margin loan rates instead of mortgage rates. The availability of credit to enter the stock market largely caused the boom of the 20's, then the Fed called in the margin loans and pursued tight money for the better part of the depression, thus effectively causing the depression.

The fed's public position of course was that they needed more power to have prevented the depression, which was a ploy. They never intended to prevent the depression.... problem/reaction/solution.

The fed is now saying they need more power to handle this crisis, so the pattern continues.

I posted the quote because it's interesing that 1) the fed admits fault (even though they spin the situation in their favor) and 2) the chronicle actually published the quote.

BTW, the Fed maintained dangerously low margin rates during the tech boom of the 90's.

 

[Xenophage]

This essentially tells you *why* Bernenke is doing what he is doing today. He's attempting to avoid another great depression by following the advice of Milton Friedman and injecting liquidity into the market.

I love Friedman for a great many reasons, but he sure was wrong about the depression and about monetary policy in general. To his credit, Friedman always believed in dismantling the Federal Reserve and returning to a gold standard, but he also believed that the current fiat system could be maintained through proper policy-making. Friedman thought monetary policy and interest rates should be determined by a computer rather than a person. The computer he preferred was: the free market (e.g. privatize the banking industry). This is the Milton Friedman that Bernenke *should* be listening to.

 

[linusPAULing]

This essentially tells you *why* Bernenke is doing what he is doing today. He's attempting to avoid another great depression by following the advice of Milton Friedman and injecting liquidity into the market.

Bernanke is telling us what he *wants us to believe* is the reason he's doing what's he's doing.

Right now we have a private monopoly in control of our monetary system, entirely capable of generating booms and busts while simultaneously having exclusive insider knowledge of the timing of these booms and busts. The only impediment to this monopoly taking advantage of this situation is their own benevolence... God knows congress isn't getting in their way.

Frankly, this private monopoly has a legal obligation to their stock holders to maximize profits. The day the Fed was ratified it had a conflict of interest... do they stabilize the US economy for the benefit of the country, or do they destabilize it for their own intests. There is a very viable argument that the Fed has a responsibility to their stock holders to cause booms and busts in order to make profits from it.

I love Friedman for a great many reasons, but he sure was wrong about the depression and about monetary policy in general. To his credit, Friedman always believed in dismantling the Federal Reserve and returning to a gold standard, but he also believed that the current fiat system could be maintained through proper policy-making. Friedman thought monetary policy and interest rates should be determined by a computer rather than a person. The computer he preferred was: the free market (e.g. privatize the banking industry). This is the Milton Friedman that Bernenke *should* be listening to.

Anything would be better then putting the fox in charge of the hen-house.