[vkou]

> The Fed has been consistently wrong over last decade in many of their policy, and their credibility is on the line.

Considering that after 2008 and 2020, we did not end up living in a weird Mad-Max blood-covered hellscape, trading bottlecaps for hits of zyme and ammunition (Which would have been the likely ideological outcome of 'just let the whole economy fail'), I think the Fed has weathered the past two decades fairly well.

[gitfan86]

I recently read a book that was basically a diary of a businessman from the great depression with some commentary.

It seems like there were two big problems that we have done a good job avoiding since then.

#1. Way too many people were rich on paper and with margin.

#2. Once the economy started to collapse everyone panicked and tried to avoid spending money, which causes a negative feedback cycle.

2008 was similar to issue 1, but we avoided step 2 by bailing out the banks and auto companies that should have collapsed.

[vkou]

> bailing out the banks and auto companies that should have collapsed.

'Should' is doing a lot of work in that sentence.

Should a business that's selling $10 bills for $9 collapse? Yes, that's pretty obvious.

Should a business that's consistently selling $10 bills for $10.05, but requires access to short-term liquidity that completely evaporated overnight to function, and is now not functioning, because some other unrelated part of the economy is sick, and all flow of credit has stopped?

Should that latter business fail? Who's going to be better off for it failing? Even if killing that business will create an economic catastrophe, as well as a mountain of geopolitical concerns that are the consequences of de-industrialization? [1]

On a metric of anything but ideological purity, the fed stopping the economic collapse where it did was a bargain at twice the price.

[1] Just ask Russia in 2022 how well de-industrializing all of its inherited Soviet economy has worked out for it. It's now in the unenviable situation where its domestic production can't even sustain a Soviet-era standard of living, without relying on now-sanctioned foreign trade.

All because it hyper-optimized on growing the 'productive' parts of its economy (Oil, oil, gas, oil, and gas), and let the unproductive parts (all that old, crappy, internationally uncompetitive Soviet industry) rot away.

[gitfan86]

Sorry, my mistake I meant to say would instead of should.

I don't think that the janitor at GM "should" have lost his job. It would have been nice if everyone lying about the real quality of the MBS products lost all the money they made though

[voisin]

> #1. Way too many people were rich on paper and with margin.

Isn’t this the housing market today? A huge portion of household wealth is the house itself and thanks to massive increases everyone feels rich because on paper it looks good, but it is all financed with ever increasing levels of debt.