Smarty_Pants

The Fed's Role in Helping the Economy

Let me guess: Economist Dr. Scott Brown is a Doctor of Keynesian Economics.

"The economy is largely driven by credit."

This is the Keynesian framework we find our economy trapped in these days. Austrian School economists would instead point out that past use of credit resulted in large mal-investments in economic activities that would otherwise not have occurred. Remove the ever expanding credit bubble and those mal-invested activities collapse to the point where non-credit driven demand will support them. It's called a recession and Keynesians don't like them. Any spending is good spending to a Keynesian, whether it's an efficient use of resources or not.


"The Fed has stepped in to fill the gap, temporarily buying large amounts of agency debt, mortgage-backed securities, and asset-backed securities. These purchases aren’t meant to be an ongoing Fed function. The Fed will have to back out of these markets at some point, and that could prove to be difficult."

Funny how Keynes original concept of "spend during bad times and repay during good times" is only half implemented. The repayment never occurs, just as it is highly unlikely that the FED will ever 'back out' of their current debt swaps and purchases because doing so will cause some part of the debt laden, credit driven economy to tank in response.

Keynesians have finally realized the dead end result of their credit driven system. Every attempt to rid themselves of the tar-baby will only result in having it stuck more firmly in place.

The only way to avert the recessionary/depressio... slowdown that the economy needs to stabilize will be to print dollars like there's no tomorrow.

Zimbabwe here we come.