Greenspan fears US government set for more debt stalemate

BBC

Greenspan fears US government set for more debt stalemate

Alan Greenspan said the eurozone needed “consolidation politically”

Former US Federal Reserve Chairman Alan Greenspan has said that a repeat of the crisis that brought the country close to default is “perfectly conceivable”.

He told the BBC that he had not seen another situation in Washington where “compromise” seemed so far away.

Mr Greenspan confessed to sympathies with the aims of the Tea Party, the Republican faction that fought the government during debt ceiling talks. Continue reading “Greenspan fears US government set for more debt stalemate”

Hating on Ben Bernanke

New York Times
Op-Ed Columnist

Hating on Ben Bernanke

By PAUL KRUGMAN
Published: September 16, 2012

Last week Ben Bernanke, the Federal Reserve chairman, announced a change in his institution’s recession-fighting strategies. In so doing he seemed to be responding to the arguments of critics who have said the Fed can and should be doing more. And Republicans went wild.

 

 
Fred R. Conrad/The New York Times

Paul Krugman

Now, many people on the right have long been obsessed with the notion that we’ll be facing runaway inflation any day now. The surprise was how readily Mitt Romneyjoined in the craziness.

 

So what did Mr. Bernanke announce, and why?

The Fed normally responds to a weak economy by buying short-term U.S. government debt from banks. This adds to bank reserves; the banks go out and lend more; and the economy perks up.

Unfortunately, the scale of the financial crisis, which left behind a huge overhang of consumer debt, depressed the economy so severely that the usual channels of monetary policy don’t work. The Fed can bulk up bank reserves, but the banks have little incentive to lend the money out, because short-term interest rates are near zero. So the reserves just sit there. Continue reading “Hating on Ben Bernanke”