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« WSJ: Put Down That Shovel! | Main | WSJ: Lessons from a Dow Decade »

February 04, 2010


John Donovan

I hope to hell you’re right, but where’s the evidence that Bernanke thinks along these lines? Or are you, too, slyly trying only to ‘seed’ these ideas?

Gentle Ben seems publicly clueless about the multiple dimensions of his policies and prescriptions. Yes, ballooning the monetary base and keeping rates at zero for ‘an extended period’ may be what’s required for now, but it would be much more reassuring of his grasp on reality if, for example, he would shade his public pronouncements with acknowledgments that such policies hurt savings and fuel the very kind of reckless reach for extra yield that corrupted credit markets in the last decade.

Beyond pledging easy money and defending the Fed’s authority (and seeking to enlarge it), does he, or anyone at the Fed for that matter, show leadership, or even true understanding, about the dangers of excessive credit creation, the temptations toward which have only grown in our era of global fiat money?

Robert Dobb

On this subject, your key quote, Andy.... "without politicians mucking it up"... sums it all up.

Lots of luck here.

Just like your previous suggestion of The Paulson Purchase? Once again, Congress got in the way of a very good, very simple solution.

nicholas kass

once again ...leadership counts....perhaps
Ben can demonstrate the sovereignty of the Federal Reserve and make this move

Chris Selland

Great post - for the sake of the country I hope you're right...

Willy G Lago

All that money.
All that years of "works hard" and sacrifice.
All that smart people.
And EEUU is going to do the same errors that 3rd world economies.
I hope for all the world (not only USA), you have right and the leverage and instruments in what the banks can invest will be controlled for the FED.
Thanks for open our blind eyes.


I guess the reader doesn't read mish. The correlation of gold to inflation hasn't proven out. However, there is a strong correlation between gold and credit. If credit gets reined in, watch gold soar.


Mr. Kessler, I've read a lot about the crisis since it happened but being a genuine idiot about our financial system, most of it has been lost on me.

But this post is an exception. I understand, finally, how it happened. And most importantly, I can relate this to my own perceptions of what has gone wrong, not at the level of the American FED but with our society in general.

We have all been living on too much easy credit, every one of us. We have been living beyond our means for decades. That is the biggest bubble and if that were to burst, which I think it is, we will eventually land on our feet on solid ground.

Perhaps then it doesn't matter if the FED reduces the leverage available to banks. We can starve them by reducing our own demand for easy money by living within our means. Yes we will suffer in the short term but prices for everything will eventually come down and we will be able to afford the things we want and need without going into unbearable debt.

Michael Smith

What is needed is an end to government participation in the economy -- including, especially, an end to government involvement in the financial sector.

This means eliminating the Fed and eliminating fiat money. Until that is done -- until we strip government of the power to manipulate the money supply -- it will continue to exercise that power and attempt to "manage" and "plan" and "stimulate" economic activity -- and our wealth-destroying roller coaster ride from crises to crises will continue, with the leviathan of federal power growing with every dip we experience and with the leviathan‘s inflationary appetite consuming ever-more of our lives.

Unless we change course, the leviathan will eventually eat us alive. It will be an ugly ending indeed.


There is a much easier way---only permit banks to make non-recourse loans. Such really forces them to know their customer

There have studies about California lending, which is often non-recourse, that shows this works better for everyone

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The political class went along because it lacked the fortitude to attack our two fundamental problem---income distribution coupled with a lack of control over the price of oil, resulting in billions of tribute being paid each month for oil imports.

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