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Three cures for three crises | Brad DeLong, in the Taipei Times
by possibly noteworthy at 11:03 pm EST, Jan 3, 2008 |
Since late summer, the US Federal Reserve has been attempting to manage the slow-moving financial crisis triggered by the collapse of the US housing bubble. At the start, the Fed assumed that it was facing a first-mode crisis -- a mere liquidity crisis -- and that the principal cure would be to ensure the liquidity of fundamentally solvent institutions. But the Fed has shifted over the past two months toward policies aimed at a second-mode crisis -- more significant monetary loosening, despite the risks of higher inflation, extra moral hazard and unjust redistribution. As Fed Vice Chair Don Kohn recently put it: "We should not hold the economy hostage to teach a small segment of the population a lesson." No policymakers are yet considering the possibility that the financial crisis might turn out to be in the third mode.
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RE: Three cures for three crises | Brad DeLong, in the Taipei Times
by ubernoir at 8:56 am EST, Jan 4, 2008 |
possibly noteworthy wrote: Since late summer, the US Federal Reserve has been attempting to manage the slow-moving financial crisis triggered by the collapse of the US housing bubble. At the start, the Fed assumed that it was facing a first-mode crisis -- a mere liquidity crisis -- and that the principal cure would be to ensure the liquidity of fundamentally solvent institutions. But the Fed has shifted over the past two months toward policies aimed at a second-mode crisis -- more significant monetary loosening, despite the risks of higher inflation, extra moral hazard and unjust redistribution. As Fed Vice Chair Don Kohn recently put it: "We should not hold the economy hostage to teach a small segment of the population a lesson." No policymakers are yet considering the possibility that the financial crisis might turn out to be in the third mode.
likewise -- that is scary |
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Three cures for three crises | Brad DeLong, in the Taipei Times
by Decius at 11:29 pm EST, Jan 3, 2008 |
Since late summer, the US Federal Reserve has been attempting to manage the slow-moving financial crisis triggered by the collapse of the US housing bubble. At the start, the Fed assumed that it was facing a first-mode crisis -- a mere liquidity crisis -- and that the principal cure would be to ensure the liquidity of fundamentally solvent institutions. But the Fed has shifted over the past two months toward policies aimed at a second-mode crisis -- more significant monetary loosening, despite the risks of higher inflation, extra moral hazard and unjust redistribution. As Fed Vice Chair Don Kohn recently put it: "We should not hold the economy hostage to teach a small segment of the population a lesson." No policymakers are yet considering the possibility that the financial crisis might turn out to be in the third mode.
This is a scariest thing I've read in the past few months. |
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