Word: feds
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Dates: during 2000-2009
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...given: rates are stuck between 0% and 0.25% for the foreseeable future. Instead, the only real news one can hope for out of a Federal Open Market Committee (FOMC) meeting has to do with the $1 trillion-plus stash of mortgages and other debt securities that the Fed has built up during the past two years of financial turmoil. Is it going to step up its purchases (meaning it's still worried about economic collapse) or start winding them down (meaning it's starting to worry about inflation...
...When the FOMC emerged from a two-day meeting on June 24, though, it didn't even offer a definite signal on that. "There's clearly a debate going on within the Fed as to what they should do next, and there's no need to make a decision yet," says Marvin Goodfriend, a former chief economist at the Federal Reserve Bank of Richmond who now teaches at Carnegie Mellon's Tepper School of Business. "The Fed is essentially buying time before it commits to whether the disinflation risk is greater or the inflation risk is greater." (See pictures...
Does this sound familiar? The financial history of the past decade is replete with echoes of Fisher's colossal 1929 miscalculation. A brilliant Fed chairman was credited with banishing panics and ushering in what economists called the Great Moderation. An explosion of financial innovation was deemed to have provided investors, corporations and banks with new ways of managing risk. Prices of stocks, houses and other assets rose to levels that were high by historical standards--but who was to say the market was wrong in fixing those high values...
...dispersed information. They regulated global economic affairs with a swiftness and decisiveness that governments couldn't match. And then, as debt markets began to freeze up in 2007, suddenly markets didn't do any of these things. "The whole intellectual edifice collapsed in the summer of last year," former Fed chairman Alan Greenspan said at a congressional hearing in October...
...figure in the revival was the University of Chicago's Milton Friedman--and his libertarian ideological bent was certainly a factor. Friedman never believed markets were perfectly rational, but he thought they were more rational than governments. Friedman saw the Depression as the product of a Fed screwup--not a market disaster--and convinced himself and other economists (without much evidence) that speculators tended to stabilize markets rather than unbalance them...