

Paul Volcker: ‘The Time We Have Is Growing Short’ - cwan
http://www.nybooks.com/articles/archives/2010/jun/24/time-we-have-growing-short/?pagination=false

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stretchwithme
There's a reason why his tenure at the Federal Reserve spelled the end of
inflative 70s. One of the smarter things Jimmy Carter did.

We suffered a severe recession because of his tightening of rates, but it set
the ship right.

And here we are suffering a severe recession and all we've done is avoid
dealing with the real issues.

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gahahaha
The situations are very different from each other. The recession in the 70's
was provoked by the fed by raising interest rates in order to stop rampant
inflation. The cost to the economy has been calculated to 17% of GDP (about
$2.8 trillion today). So when the fed started printing money again the economy
bounced back rapidly. (and it was "morning in America" - gee thanks for
nothing Reagan) Now we had low interest rates before the crisis and 0 interest
rates for the forseable future. There will be no bounce back, but a long slog.
Very possibly a lost decade. Especially if the deficit hawks (where were they
during the Bush spending spree?) gets their way and the government pulls back
fiscal and monetary stimulus.

You can say that we are not dealing with the situation, but it is not at all
clear what should be done. Or what can be done.

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stretchwithme
its not the same situation. But Volcker acted sensibly and makes more sense
now than congress or the president do.

It is clear what must be done. Or at least not as fuzzy as you suggest. We
must face the music, stop playing games and start practicing sensible
policies.

we should stop supporting things that have failed certainly.

And subsidizing risk is definitely one thing that doesn't work.

But we are continuing to do so, especially in the housing market. And we are
doing so that nobody needs to deal with the reality of the actual value of
their homes. Or the actual sad worth of the balance sheets of banks.

Instead we are asking those who acted responsibly to pay for the mess. Or
rather we are borrowing like mad so we can dump it upon them later.

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david927
I like to say that we're burning the last of the fire wood trying to keep it
feeling like Summer, rather than saving it for the Winter that's setting in.

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brc
Transferring private losses to the public balance sheet is going to be
disastrous. It's the 'hair of the dog' solution - avoid a hangover by
continuing to drink. The problem is the eventual hangover is made that much
worse.

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anigbrowl
A fine and insightful essay. His remarks about Ireland are spot-on in terms of
both the political mood and the economic considerations.

