When the facts change, I change my mind. What do you do? -- John Maynard Keynes

Saturday, December 14, 2013

Federal Reserve Creates a Bust to Bubble Economy

The whole problem with the Federal Reserve is that the mistake of the double mandate requires them to try to achieve a full employment economy. Unfortunately, that means creating a "bubble economy" because "full employment" only occurs in a "bubble economy" in the modern world as created by central bankers and governments around the world -- and what's the inevitable fallout? --

Nouriel Roubini warns that policymmakers are powerless to rein in frothy housing markets around the world. - Project Syndicate: "....In countries where non-recourse loans allow borrowers to walk away from a mortgage when its value exceeds that of their home, the housing bust may lead to massive defaults and banking crises. In countries (for example, Sweden) where recourse loans allow seizure of household income to enforce payment of mortgage obligations, private consumption may plummet as debt payments (and eventually rising interest rates) crowd out discretionary spending. Either way, the result would be the same: recession and stagnation. What we are witnessing in many countries looks like a slow-motion replay of the last housing-market train wreck. And, like last time, the bigger the bubbles become, the nastier the collision with reality will be."

Remedy: repeal the double mandate; have the Federal Reserve focus solely on a sound currency and banking system. Unemployment is an issue of fiscal policy (President and Congress) not monetary policy (Federal Reserve).


The Big Picture

Financial Crisis - The Telegraph

JohnTheCrowd.com | The Sailing Website

Craig Newmark - craigconnects