September 21, 2006

BEN TOLLS FOR THEE:

Fed freeze spurs chills: With the rate tightening over (for now) analysts wonder if real trouble is coming (HEATHER SCOFFIELD, 9/22/06, Globe and Mail)

It's happened with alarming frequency: The Fed's rate-tightening cycle ends, and crises around the world start to pile up. Will this time be any different?

In 1984, it was an overleveraged Continental Illinois National Bank and Trust that started a run on banks. In 1987, it was a stock market crash.

In 1994, Orange County went bankrupt, and in 1998, Long Term Capital Management collapsed and the Russian currency crisis spread to Latin America. Then in 2001, rates were peaking just as Enron and WorldCom collapsed, shaking confidence across North America.

Now, with the Fed clearly on hold after yesterday's announcement of no change in interest rate policy, the pattern would dictate that another crisis is about to begin. [...]

"The Fed is well aware of their record of triggering financial crises," Sherry Cooper, chief economist for BMO Nesbitt Burns Inc., wrote in a commentary yesterday.


Despite twenty-plus years of global deflation the Fed has periodically spooked itself into fighting an inflation that doesn't exist--it has to have some consequences when they biff policy that badly, no?

Posted by Orrin Judd at September 21, 2006 12:00 AM
Comments

... it has to have some consequences ... , no?

Yes, but only when Republicans are power.

Posted by: erp at September 21, 2006 10:45 AM
« GETTING THEM TO TET THEMSELVES IS THE HARD PART: | Main | SHOCKING, EH?: »