Thursday, January 15, 2009

Do we need to do much more than stimulate?

Adam Carr of IPAC Securities:

"Fed Chair Bernanke gave a speech Tuesday suggesting that fiscal measures may not be sufficient in creating a lasting recovery. He suggested public funds should instead be used to strengthen the financial system by either buying distressed assets, guaranteeing those assets or creating another entity to take those assets off balance sheet. He also suggested that continued credit losses, asset write-downs and a weak economy would pressure balance sheets for some time. Worrying stuff.

Yet that being the case I’m not sure these institutions will be in a position to do their job of providing credit to the economy in a cost efficient way. Particularly higher risk business lending. I’ve been hearing a lot of talk about public institutions being set up temporarily to provide such credit. To be honest and as much as I loathe the idea of such a hands on approach – it beats the alternative of a prolonged recession. Why should a nation endure a recession because of one faulty cog? Cut the apron strings – thank you and good bye, you have failed the nation."

The text of Bernanke's talk to the London School of Economics is here.

audio is available as well, on my new podcast site - the economics talks I listen to while cycling to work!