Monday, January 21, 2008

Why Bernake Should NOT Cut Rates…

Business Article

But oh shucks, why listen to amy authority that actually speaks some sense? Best off listening to David Smith instead?

Posted by orwell @ 10:45 AM (553 views)
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2 thoughts on “Why Bernake Should NOT Cut Rates…

  • David Smith's Sub Prime. . . says:

    “…But Bernanke is setting the stage for an even bigger recession down the road. Just as the ultra-low rates of the early 2000s created many of the problems we’re experiencing today, pumping money into the system would probably stoke inflation, forcing the Fed to hike rates sharply in the near future. “It’s better to take a small recession and kill inflation immediately instead of facing high inflation and a really big recession later,” says Carnegie Mellon economist Allan Meltzer.

    Meltzer, who is finishing the second volume of his history of the Federal Reserve, warns that Bernanke is risking a disastrous replay of the 1970s, when high oil prices fueled double-digit inflation. Every time the Fed started to tighten and unemployment jumped, chairmen G. William Miller and Arthur Burns lost their nerve. They lowered rates to boost job growth, and inflation inevitably revived, causing a vicious price spiral….”

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  • I’ve been saying this since the MPC cut rates – they should be learning from the US’s mistakes and not cut rates to fuel inflation. The pound has dropped over 14% against the euro on the back of the last cut.

    If they cut again to keep the housing market dead horse awake, currency traders will not wipe their backsides with pound notes next month

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