AIG Is Not the Story

This is the economic story of the day (and, probably, the year, and maybe of our lifetime). Yesterday, Ben Bernacke decided, in the words of one economist, to buy "everything in America that isn’t nailed down".

It's telling that this story has gotten little coverage amid all the fussing and fighting about AIG bonuses. The Fed is putting over a trillion dollars behind a massive and risky effort to force liquidity into our financial system. It could lead to hyper-inflation, and it will probably devalue our currency. Since the Fed is led by people who know the consequences of their actions, I can only assume that the alternative was much, much worse.

That said, everyone can feel free to continue complaining about AIG bonuses.

Comments

I think far more likely is they're so myopic in their Keynesian thinking that they don't see the risk, or minimize the risk in their own minds; not to mention so intent on doing favors for their friends.

Bernacke is definitely wary of doing too little, not too much.