John on January 14, 2012 at 9:01 am
The Daily Mail reports on transcripts of FED meetings from 2006 which were released yesterday:
The extraordinary delusion of those who ran the world’s biggest economy, from the chairman of the Federal Reserve downwards, has been laid bare by the release of transcripts of Fed meetings from the year before the crash.
Mr Bernanke predicted that the end of the housing bubble would be ‘at worst an orderly decline’, rather than the widespread disaster it became.
But his prediction that the bubble would pop gently was in fact one of the least wrong guesses about the future of the economy.
Treasury Secretary Timothy Geithner, then a Fed official, said there was little risk of ‘collateral damage’ from the housing market.
And Susan Bies, a Fed governor, even suggested that a fall in the housing market could benefit the rest of the economy.
There was a gradual realization that things were worse than anticipated but:
The transcripts of the final meeting of the year, in December, showed that Mr Bernanke was still expecting that the economy would experience a ‘soft landing’ in which growth would slow enough to cool inflation but not drop into a recession.’
This makes the prescience of the few people who did predict the crash all the more impressive.
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