Tuesday, September 1, 2009

Meltzer on the recession

Allan Meltzer argues in The Wall Street Journal that the current recession is not like the Great Depression. I thought this paragraph was interesting.
The Federal Reserve also shared this Keynesian viewpoint. It provided unprecedented monetary stimulus, increasing the monetary base by more than $1 trillion. Much of this increase corrected for its major mistake: allowing Lehman Brothers to fail. After 30 years of bailing out almost all large financial firms, the Fed made the horrendous mistake of changing its policy in the midst of a recession. That set off a scramble for liquidity and heightened the public's distrust in the market.

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