Ben Bernanke: Swapping Beetles for Toads

Escrito el 23 Julio 2009 por Antonio Rivela Rodríguez en Uncategorized

I appreciate Brendan Quirk taste for finance journalism once again. I hope you like his opinion on US economy:

In the 1930s beetles ravaged Australia’s sugar crops. As pest problems escalated, farmers successfully lobbied the Australian government to introduce a non-native species of toads into the environment thinking that the toads would eat the beetles. Americans, when faced with their own crisis, albeit financial, decided to experiment with the toad solution. To combat the recession and threats of deflation, Ben Bernanke reduced the Fed’s rate practically to zero, while printing and pumping substantial sums of money into the economy. Although most economists agree that the American government was right to take action, the Fed’s strategy has only replaced the problem of deflation with inflation.

In Australia the toads had different culinary desires then expected and ended up feeding on other native species. Basically exacerbating the situation and ending up with two problems and no solution. Ironically toads have become an invasive threat to Australian biodiversity, even to this day. While Americans may have successfully traded beetles for toads as their economy has seemingly thwarted deflation. They are still not raising interest rates, and won’t for some time, as expressed by Ben Bernanke in his 21 July 2009 article in The Wall Street Journal, “The Fed’s Exit Strategy.” Bernanke says that it is necessary to make sure that the crisis is over before the Fed can start increasing interest rates and essentially slowing the economy.

Americans want to feel reassured that their government has a plan and that it is working and maybe a few want an early Christmas in July. Bernanke‘s exit strategy will involve increasing interest rates and it is only a matter of when and by how much. But he reminds the American people that they are not out of the woods yet and the road to recovery is long and far. Inflation is a real fear, but still more important is restoring the economy and showing that we are not just throwing toads at our beetle problem.


BroJo 26 Julio 2009 - 00:31

She swallowed the frog to catch the fly … I don’t know why, we swallowed the fly …
Brendan Quirk is a sharp guy.

Ron Derven 20 Septiembre 2009 - 20:37

Deflation? Inflation? The small businesses we cover on our website have been and continue to be cut off from credit. i don’t know why this isn’t a bigger story or why the masters of the universe at the Fed don’t seem to realize this (or maybe they do and don’t care).. I understand from a news story this week that the Obama Administration wants to cut out the banks and lend money in the form of student loans directly to students. Great idea. Now they need to do that with small businesses; politely ask for taxpayer money back and then lend it directly since the banks won’t.

One entrepreneur we interviewed recently (and he is typical) had a rather large credit line cut off completely. He used this to finance inventory. He asked his banker why this had happened and reminded the banker that over the past 30 years he had deposited on average $5 million a year with the bank. The banker’s response was that it was nothing personal, just business. This entrepreneur had $100,000 left in a home equity line of credit and is using that money to keep the business going through the holiday season. if the holiday season is not a good one, he will shut his doors permanently in early January 2010. I am not hopeful for a good holiday season. Action needs to be taken to allow businesses like the above mentioned to have access to credit.

Ron D


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becnelch 31 Octubre 2015 - 06:34

On the obligation side of the monetary record, to adjust that, we make holds in the managing an account framework. Presently, what these stores are is basically stores that business banks hold with the Fed, so here and there you hear the Fed is printing cash, that is not by any stretch of the imagination happening, the measure of trade out course is not evolving.

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