17 Jul 2014

The Fed Chairs Have a Habit of Hazing

Business cycle, Tom Woods 16 Comments

As I make clear in my recent interview with Tom Woods, I think that Bernanke painted himself (and the US economy) into a corner, then handed the paintbrush over to Janet Yellen.

In case I sound “paranoid,” let’s review our history:

==> Paul Volcker took over as Chair of the Fed in August 1979. A recession officially began five months later, in January 1980. The second “early 1980s” recession officially began in July 1981; the annual unemployment rate was 9.7% in 1982. This was the worst recession since the Great Depression.

==> In August 1987 Alan Greenspan took over the Fed. Two months later “Black Monday” occurred on October 19, 1987, when the Dow dropped 22.6% that day alone–the worst one-day crash in history.

==> In February 2006 Ben Bernanke became Fed chair. The worst recession since the Great Depression officially began in December 2007, and you may recall there was some trouble in the financial markets in September 2008…

==> In January 2014 Janet Yellen became Fed chair. The US stock market crashed and slipped back into major recession on _____?

16 Responses to “The Fed Chairs Have a Habit of Hazing”

  1. Tel says:

    So how do I profit from the coming crash? Does anyone know the proper procedure?

  2. Sam Geoghegan says:

    Can somebody please explain to me why interest rates would rise if China dumped U.S. bonds?
    I get that supply and demand affects the price of bonds/yields, I just don’t get the first bit. Sorry if this is a stupid question.

    • James Oswald says:

      The price of a bond moves in the opposite direction of the yield, so if the price goes up, the yield goes down (lower interest rates). If China stopped buying bonds, demand would go down. When demand goes down, normally the price decreases.


      • Sam Geoghegan says:

        I kept reading into it, a general interest rate rise across the board. So it only affects the bond market? Makes sense.

        I guess a rise in yield would render previously issued bonds unattractive too, so a general decline in the bond market and confidence.

        Sorry, newb here.

        • Cosmo Kramer says:

          A whole lot is based on those interest rates.

          And I wouldn’t be too worried about China dumping our bonds.

  3. Major.Freedom says:

    Does this mean we’re in for another Police Academy movie sequel?

  4. Raja says:

    I say bar the Fed chairperson from ever resigning. We won’t have a recession, until the person dies. Even better put a kid as a chairperson and we have even more years of unhampered prosperity. All the stats we’ll ever need will be the stats of the vitals of the chairperson to know when to start worrying about a slowdown.

    • Gamble says:

      It is not the chairperson that is the problem, it is the institution itself.

      Faces change, mission stays the same. Grow government, dilute purchasing power(shrink the individual). Make cronies happy and pad pockets along the way.

  5. laugh says:

    Hahahaahaha……….the recession in 80 was induced by Volker’s interest rate hike. He was fighting inflation you dope.

    • Bob Murphy says:

      Hahahaahaha……….the recession in 80 was induced by Volker’s interest rate hike. He was fighting inflation you dope.

      Right, just like Yellen will be “fighting inflation” or “unwinding the huge balance sheet” when she is forced to do things that induce an awful recession.

      • Dan says:

        Didn’t you already ban this guy when he went by “Joe”?

  6. Jeff says:

    One of the problems is that the Fed has bad monetary policy trying to make up for bad fiscal policy. Each new Fed chair claims that they while stop the bad monetary policy. But without a change in fiscal policy the Fed will once again need to back to bad monetary policy. So unless Yellen starts with bad monetary policy, yes here we go again. Which is all a long winded way to say that unless Congress starts spending within their cash flow limit the problems will just continue the cycle.

  7. Sean says:

    I forgot how interesting this site is; seriously!

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