Mish's Global Economic Trend Analysis Message Board

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Strategies & Market Trends : Mish's Global Economic Trend Analysis

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To: mishedlo who wrote (29339)	5/4/2005 2:03:39 PM
From: Tommaso	Read Replies (1) of 116555

Mish, I have been reading Kindleberger's "Manias, Panics, and Crashes" again, and if there is one thing that is clear, it is that ever since the 1930s the Federal Reserve has been ready to be the "lender of last resort" within the United States and to some extent internationally. The Fed has a clear record of creating money in large amounts whenever any crisis occurs, and sometimes when it only guesses that a crisis might occur. Is there any reason to suppose that in the event of a deflationary contraction, the Fed would allow the event to proceed without rescuing many institutions and even persons from bankruptcy? As we all know, there is a an enormous amount of probably unpayable debt both within the U. S. and in its obligations to central banks and others in other countries. The Fed has the power to say to any bank or person that it pleases, "Here is an unlimited line of credit for you to draw on until the crisis is over." There is no limit to the amount of money that the Fed can create. To me, it seems that the danger to prepare for is this deliberate debasing of the currency that the Fed engages in to prevent a cessation of economic activity.

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