I've lost the link, but I remember about how Greenspan has commented (after stepping down from the Fed Board) that what the economy really needed was a temporary jolt of super high interest rate to get it off the collision course with recession.
Yes, bond investors would have a field day, but the average American is running on debt, not investments, and the impact could be catastrophic. I think Greenspan argued that that is exactly the problem, and needed to get Americans away from living off of debt. The temporary pain would be worth the long term overall health.
Of course, such a move would never be politically possible so... our slide continues. My personal take is that Bernanke isn't so much as averting recession as he is just trying to soften the damage upon impact. With that, I think more rate cuts are in our future, at least for the short term.
Last edited by Broken Arrow : 01-09-2008 at 09:13 AM.
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