Wednesday, February 4, 2009
by Martin Denholm, Managing Editor, Smart Profits Report
“I would like to say to Milton and Anna: Regarding the Great Depression, you’re right - we did it. We’re very sorry. But thanks to you, we won’t do it again.”
So said Federal Reserve chairman Ben Bernanke to Milton Friedman at the legendary economist’s 90th birthday.
A mere Fed governor at the time, Bernanke was referring to the fact that Friedman, along with his colleague Anna Schwartz, had blamed the Great Depression on the Fed’s failure to load the financial system with enough cash.
And true to his pledge, Bernanke and his fellow Fed bankers are plowing as much cash into the system as they possibly can. Several other central banks around the world have followed suit, determined not to repeat what Friedman and Schwartz argue was a mistake back in 1930.
The Bank of England, for example, is expected to hack the base interest rate from 1.5% to 1% tomorrow. It will do so in the face of opposition from the respected National Institute of Economic and Social Research (NIESR), who state that, “… the last interest rate cut had not very much point to it.”
In forecasting a 2.7% contraction for the British economy this year - the worst performance in 60 years - it suggests buying corporate bonds would be a better way out of the mire. With credit having dried up, it argues that loosening monetary policy is now ineffective.
I wonder what Friedman and Schwartz would make of that…
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Titans Of The Tracks
File this one under the “Gee, what a surprise” section…
Quarterly earnings reports are bad. Really bad.
