Wednesday, February 11, 2009

The Fed in Minneapolis is Against Bailouts/Stimulus!

Okay, not exactly. The paper clearly indicates it is the express view of the authors and not that of the Minneapolis Federal Reserve. But check out this abstract from a paper posted by Timothy J. Kehoe (University of Minnesota, Federal Reserve Bank of Minneapolis, and National Bureau of Economic Research) and Gonzalo Fernández de Córdoba(Universidad de Salamanca):

"Studying the experience of countries that have experienced great depressions during the twentieth century teaches us that massive public interventions in the economy to maintain employment and investment during a financial crisis can, if they distort incentives enough, lead to a great depression."

It's ironic that a branch of the Federal Reserve has an economist who advocates the exact opposite of what we have been doing. Wake up people this intervention is making things worse!

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