Subscribe/RSSThe media frequently quotes the Fed chairman, Ben Bernanke, and every market pundit gives his opinion and analysis on what the Fed is doing and the likely outcome. Bernanke has recently stated, “the recession is over.”
When ever I am interested in someone’s opinion, my first idea is to consider the source. What is their track record? What assumptions are they making? Even if it is about something I am familiar but I don’t agree with them, is there anything is what they have to say that may still be valuable?
In the case of the Bernanke and the Fed, I recently read the book “In Fed We Trust.” The book does an outstanding job with a brief history of the Fed, the main thoughts and ideas of the Fed govenors leading up to the panic and an almost day-by-day and week-by-week reporting of what they thought and did during the panic.
One thing is perfectly clear. Bernanke and the main decision makers were clueless to the extent of the credit/debit, real estate and all other financial problems leading into 2007 and beyond. They were totally blindsided. A theme of the book is Bernanke would do “what ever it takes” to prevent another depression which he is a great student and authority. He may have helped temporarily stopped the bleeding, but at what cost? The cost of the increased debt load of the U.S. government from the bailout and stimulus plans is very likely to exasperate the problems in the months and years to come.
I think a more important lesson is – If these guys didn’t have a clue to begin with, why should we have faith they now understand the problems and have a clue to the solutions? Did they all of a sudden get so smart in less than a year during the greatest financial panic since the 30″s that they now understand the underlying problems and actually think they’ve come up with permanent solutions? I doubt it.
I would beware any forecasts made by the Fed (or the current administration) and the Fed media commentators. They don’t have a very good track record.
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