Wednesday, April 02, 2008

Take that, market forces!

Ben Bernanke:
The Fed chairman batted away suggestions that it would have been better to let Bear Stearns go into liquidation, to punish it for poor investments in sub-prime mortgages. He said that, "with the very glaring exception of the 1930s, the Fed has been an eff-ective market stability regul-ator".He added: "At the time of the Depression, liquidationist theory was supported by the Treasury, and it was partly on the basis of that theory that the Fed stood by and let a third of the banks in the country fail. The financial stability that was not addressed was a major contributor to the Depression, not just in the US but abroad. Today we will not let prices fall at 10 per cent a year, we will act to keep the economy growing and stable. There are very great differences between the 1930s and today."
The state is setting prices, something "command economies" do, and the results aren't pretty.


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