Wednesday, February 15, 2012

Keene - Fed Should Heed Lessons of 1920 Recession Response, Jim Grant Says

James Grant puts a historical perspective on government debt and bonds.  A Bloomberg story by Tom Keene begins: "The U.S. has been “overmedicated” by public policy and should consider the government’s 1920’s response to recession, said James Grant, editor of Grant’s Interest Rate Observer.

Responding to a severe economic downturn from 1920 to 1921, the Federal Reserve increased interest rates and the national budget was balanced, moves that kept the painful recession short, New York-based Grant said. In contrast, he said U.S. policy makers are prolonging the pain of the so-called Great Recession by intervening in markets and running unprecedented federal budget deficits.

“The Fed is not content to let interest rates find their levels, they must repress them, and they are not content to let housing prices find their levels, they seek to intervene to prop them up,” Grant said in a radio interview on “Bloomberg Surveillance” with Ken Prewitt and Tom Keene. “The results of all this intervention is not to cure what ails us, but prolongs the symptoms of what distresses us.” – Bloomberg story continues at the link below. 

Source:  Bloomberg
http://www.bloomberg.com/news/2012-02-14/fed-should-heed-lessons-of-1920-s-recession-policy-grant-says-tom-keene.html

To access the audio MP3 file follow this link:  http://media.bloomberg.com/bb/avfile/vN114mOLcgPw.mp3

Thanks to Casey Research’s Ed Steer for the link. 


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