Eugene David
...The One-Minute Pundit

Sunday, August 19, 2007


Comforting: our current Wizard of Oz is "a self-described Great Depression buff." Let's hope he hasn't learned the wrong lesson.

[H]e theorized that ``the financial crisis of 1930-33 affected the macroeconomy by reducing the quality of certain financial services, primarily credit intermediation.''

Translation: Many commercial banks, considered efficient at allocating credit (they have a knack for differentiating ``good'' from ``bad'' credits), failed. The ones that remained solvent wanted to hold liquid assets or, if they were willing to make loans, charged a higher rate of interest....

``It was reported that the extraordinary rate of default on residential mortgages forced banks and life insurance companies to 'practically stop making mortgage loans, except for renewals,''' Bernanke said, citing the work of the late economist A.G. Hart.

Sound familiar?


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