It may be good to be king, but it's lousy to be chairman of the Federal Reserve. Particularly when the commission that investigated the 2008 U.S. financial crisis lays some of the blame on former Fed chairman Alan Greenspan and current chairman Ben Bernanke.
The crisis was "avoidable." That's how a report in The New York Times on January 25, 2011, describes what the Financial Crisis Inquiry Commission determined after reviewing the history of shoddy mortgage lending and risky securities strategies.
Besides blaming both the Clinton and Bush administrations, the commission says that the Fed is also culpable:
"The majority report finds fault with two Fed chairmen: Alan Greenspan, who led the central bank as the housing bubble expanded, and his successor, Ben S. Bernanke, who did not foresee the crisis but played a crucial role in the response. It criticizes Mr. Greenspan for advocating deregulation and cites a 'pivotal failure to stem the flow of toxic mortgages' under his leadership as a 'prime example' of negligence."
New York Times, 1/25/11
Quoting directly from the report, "The greatest tragedy would be to accept the refrain that no one could have seen this coming and thus nothing could have been done. If we accept this notion, it will happen again."
The thing is, a few did see it coming and tried to warn the rest of the world. A perfect example is what Robert Prechter wrote about the Federal Reserve in his best-selling book, Conquer the Crash: You Can Survive and Prosper in a Deflationary Depression. In building his case for deflation, he devotes a number of chapters to why the Fed and other so-called potent directors cannot affect the larger moves of the economy. As he writes:
The spectacle of U.S. officials … lecturing Japan on how to contain deflation will be revealed as the grossest hubris. Make sure that you avoid the disillusion and financial devastation that will afflict those who harbor a misguided faith in the world's central bankers and the idea that they can manage our money, our credit or our economy.
You don't have to wait for a report two years after the next financial crisis to confirm this statement. Make a switch now to catch up on the kind of analysis that makes it easier for you to protect yourself and your family from the recession that will end up looking much more like a depression before it's over.
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