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Politics : Welcome to Slider's Dugout -- Ignore unavailable to you. Want to Upgrade?

To: Telemarker who wrote (11238)	8/21/2008 4:52:06 PM
From: jim_p	Respond to of 50331

I don’t think Bernanke envisioned the credit/housing bubble going to the extremes that it did back in 2002. I also don’t believe that anyone though it was possible to wipe out the entire capital structure of the financial system back in 2002. Also back in 2002 it was believed that the war in Iraq would be over in a year and we would be repaid from Iraq’s oil revenues. The increase in the deficits since 2002 take away a lot of the Fed’s flexibility in dealing with deflation. One of Ben’s main reasons why deflation is not a potential problem to the US back in 2002: “A particularly important protective factor in the current environment is the strength of our financial system: Despite the adverse shocks of the past year, our banking system remains healthy and well-regulated, and firm and household balance sheets are for the most part in good shape.” Nothing could be further from the truth today in 2008. Ben’s reason why Japan was not able to avoid deflation: “The claim that deflation can be ended by sufficiently strong action has no doubt led you to wonder, if that is the case, why has Japan not ended its deflation? The Japanese situation is a complex one that I cannot fully discuss today. I will just make two brief, general points. First, as you know, Japan's economy faces some significant barriers to growth besides deflation, including massive financial problems in the banking and corporate sectors and a large overhang of government debt.” Sound familiar??? Jim