Is Ben Bernanke Emulating The Japanese?

Published January 30, 2008 in Economy.

Another interest rate cut? This sounds alarmingly like the cuts the Japanese made in the ’90s.

And not in a good way. These cuts just seem panicked and just flailing.

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4 Responses to “Is Ben Bernanke Emulating The Japanese?”

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1 jerry
Jan 30th, 2008 at 4:08 pm

Don’t ask me, because I don’t know shit, but I think the favored conspiracy theory is that he was snookered last week into the 3/4 point drop by the French Bank fraud which caused the big drops that he/we all thought was due to the Asian market tanking.

And then the markets immediately decided he was going to give us the predicted 1/2 point drop today, and so since we have leaders of tissue paper, he had no choice because you must not piss the market off.

Paul Krugman of course is the person to go to, who has worried just like you that we might be turning Japanese, or running out of interest rate drops.
2 z_adura
Jan 30th, 2008 at 4:26 pm

The outcome of all of the interest rate drops of course is attaining a significantly lower valuation on all capital assets. A substantial share of the American economy is overvalued, primarily stock and real estate. The reason that we don’t address this issue by resetting the value is because it would essentially turn half of America into paupers. Ultimately, it could probably happen anyway. Such is the price for the fiscal stupidity that started with Reagan.
3 Quaker in a Basement
Jan 30th, 2008 at 5:03 pm

At this pace, the banks will soon be paying each other to haul the money away.
4 Ace_of_Bass
Feb 27th, 2008 at 11:45 am

I don’t think it can be stressed enough that whether or not Bernanke raised or lowered interest rates, he should have been consistent. But he raised them way too high only to see the economy completely destroyed, only to lower them with no appreciable effect. Lowering them now will not assuage the faltering credit and homeowner’s markets…stick a fork in them, they are done. Even with lower interest rates, lenders will not offer the credit…to practically anyone. And even if you could be approved for a home loan, with the 20-25% drop in home prices, it’s not as if you would be able to get any money from your now worthless home.
The economy the last few years was driven in no small part by people tapping into their home equity and using that to: a) buy stocks; b) go on vacations; c) buy cars; d) buy every and anything that we make. Now it’s over…it’s too late to prepare for it, it’s on us.

I must say, I really “love” how Bernanke keeps denying we are or will go into a recession.

With the lowering of interest rates yet again, who else predicts a 2:1 euro:dollar??? All in the hopes that foreign purchase of US goods/property will stimulate the economy?…yet again, a little too late.
I guess this puts a hamper on any plans to travel to Europe anytime soon…DAMN!!!

There it is…the only people who will have credit extended to them for homes or other lines of credit aren’t Americans…it’s foreign investors…I see it already where I live. If there was ever a time for “speculators” to come in and buy properties, it is now and in the coming months. The exact same problem that got us into this in the first place…super low interest rates that cannot be maintained long-term.

I have seen quite a few savvy people I know completely wiped out from buying homes. Their entire nest egg down payment completely wiped out with the declining home prices due to Bernanke’s short-minded decisions. I have never, ever seen anyone backtrack as much as he is with more deleterious consequences…completely wiped out hundreds of thousands of peoples’ life savings in a few months of raising and then lowering of interest rates.

If he “knew” first coming into office that we would have to “increase” rates, why is he now lowering them to levels before he even came into office. There would have been less disruption in the economy if he never did anything coming into office…which is exactly where interest rates are…pretty much where he came into office. Who picked this guy?!?! He is by far the stupidest smart person in government in at least 40 years. How could someone in charge of lending policy by simply manipulating the fed reserve rate screw up so much so fast with no “net” change in rates after 2 years? It’s amazing!!!

If you have a home, you are very likely upside down, and if you don’t have one because you are young or something, good luck ever getting approved for one with the tighter credit rules!!! One thing under Greenspan I have to give him credit for is that he promoted more homeownership as a percentage among Americans since it has been recorded. Uhhh…I do not think this trend will continue unfortunately
And with declining homeownership (or homeownership concentrating to a few rather), we have the widening in the differential between the net worths/wealth of the haves and have nots…and the wealth that can be transferred to successive generations.