E The Lowdown Federal Reserve Bank

 And of course this massive sterilization was the case. What was more accomodative? The Fed wanted lower interest rates, meaning it wanted lower inflation. Meaning it wanted lower growth in the economy, and really as a result, produced a terrible contraction in the economy before the holiday season in 2008. The Fed made the Great Recession far worse on purpose but says it was all about providing accommodation! Dirty Lowdown!

The chart below confirms it. I had written this well over a year ago:

Both domestically and in wholesale dollar funding to the Eurodollar shadow market, the Fed has failed to produce growth in the real economy because the expansion of the money supply is hidden in useless excess reserves that cannot be touched, not making its way to real lending, and real economic growth going forward. The new normal continues, some say by design.

Dr Selgin has just shown us that the Fed has indeed done a dirty deed by design. The Fed made it appear it was loosening monetary policy/providing accommodation, while all the while it was tightening.

 

 

This chart refers to interest on reserves paid to the banks by the Fed. The interbank lending started to dive in late 2008 as the crisis hit, and Lehman failed September 15th, which is the first vertical line, but rebounded slightly until Bernanke started paying IOR. But then IOER totally put an end to much interbank lending, and plunged the nation into a Fed induced financial catastrophe not seen since the Great Depression.

Scott Summer reamed the Fed about IOR back in 2017 with this astonishing statement:

 

The decision to adopt IOR helped to prevent the Fed from achieving its policy goals, by making the Great Recession more severe than otherwise.  That’s not just my opinion; unless I am mistaken that’s the implicit message of Bernanke’s memoir, where he indicated that, in retrospect, the Fed did not move quickly enough to cut rates in the fall of 2008.
The world would be a better place today if the Fed had never instituted its policy of IOR in 2008.  I really don’t see how anyone can seriously dispute this claim.
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Disclaimer: I have no financial interest in any companies or industries mentioned. I am not an investment counselor nor am I an attorney so my views are not to be considered investment advice. The ...

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