Media Alert: The Federal Reserve Had No Clue the Great Recession was coming in 2006; Why do we think they know what is going on now???

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January 20, 2013 by irbi2076

Inquiring minds are reading the following: Records: Federal Reserve Officials Foresaw, Joked About Housing Bubble in 2006 from PBS.com

The report speaks of new “insights from newly released transcripts detailing conversations between Federal Reserve Chairman Ben Bernanke and his colleagues at the Fed Board of Governors in 2006.”

What is interesting is the so called “All Knowing” Federal Reserve and it’s leaders really had no clue that this crash was coming as Bernanke was quoted with saying in 2006 “Strong fundamentals support a relatively soft landing in housing. I think we are unlikely to see growth being derailed by the housing market.” and “So far, we’re seeing, at worst, an orderly decline in the housing market, but there still is, I think, a lot to be seen as to whether the housing market will decline slowly or more quickly.”

Further analysis by PBS revealed the following from the 1200 pages of released transcripts:

“But it was a relative distinction. He (Bernanke) did not see the crash coming. He didn’t warn of the consequences that would unfold. You know, he holds the distinction of being, among that group of people, the one most cognizant of the downside possibilities, but it was a group of people who were all unaware of the cracks beneath their feet.”

“And it shows, you know, a group of very intelligent, very thoughtful people, you know, talking about the economic situation in the country in a considered way, evaluating what might happen, and having a discussion that, it turns out in retrospect, was far removed from the reality of the actual situation.”

“Federal Reserve Gov. Susan Bies said “that if there was a mild correction in housing, it would benefit the economy by moving resources to healthier sectors of the economy.” You’re right. They saw it. They saw that housing was crashing. They joked about the problems that home builders were having in selling homes. They would tell these stories about home builders giving away cars or dressing up empty properties so they looked occupied.”

The PBS.com article concludes “One aspect of all of all this that is very interesting is the degree to which these professionals missed how enmeshed housing had become in the economy in the widest sense.”

And this is the takeaway: They missed the Crash!  Today, the media keeps saying that today’s actions by the federal reserve are different.  That although the central planners at the Federal Reserve had no clue to what was about to happen to our economy in 2006, they somehow are now all knowing…that the unprecedented actions of Zero percent interest rates and massive monetary printing since 2008 (see below) will have saved the economy so much that we will all be riding unicorns over rainbows very shortly.

FRED Graph

In fact, the state run media (PBS) even concludes the same thing: “a lot of economists give them a lot of credit for having intervened decisively, for having moved really strongly to arrest the fall of the economy, to prevent what many people were concerned could become the first real depression in 80 years, to have prevented the collapse of financial markets through a series of unprecedented and massive interventions.”

I for one do not believe that they fixed it.  They have just shifted the problems from the private sector to the public sector.  I believe that there is GREAT downside risk.  I think that this is PROOF that you cannot trust the federal reserve.  The federal reserve is nothing more than clueless academic central planners who pretend to know what is better than the economy as a whole.  This is why we must end the fed.  It has been nothing but a disaster, and it is most probably making things worse.  If they didn’t know what they were doing while they were inflating the housing bubble, and didn’t see the crash coming, what makes you think that the SAME people know any more today?

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One thought on “Media Alert: The Federal Reserve Had No Clue the Great Recession was coming in 2006; Why do we think they know what is going on now???

  1. EthanAllen2076 says:

    When it comes to the argument if the FED knows what they’re doing, I will quite simply say it like this…

    Those that think, don’t think they do, and those that don’t think, do.

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