Yes, we have avoided a depression. But let us count the costs.

Financial firms that made irresponsible and imprudent decisions have been rescued, propped up and bailed out.

AIG has received about $180 billion. That is almost $2,000 for every American household. That money has gone to sustain the bonuses of AIG and the financial health of its counterparties, such as Goldman Sachs. This is an obscene travesty.

The Fed currently holds $600 billion worth of Fannie, Freddie and Ginnie mortgage-backed securities. I am not optimistic about how that will turn out.

The Fed has injected hundreds of billions of reserves into member banks. This will fuel future inflation unless Bernanke is willing to raise interest rates when the recovery begins. There will be tremendous political pressure on him not to do so. So inflation is likely to come along with any recovery.

Read it all.

Filed under: * Culture-Watch • History • * Economics, Politics • Economy • The U.S. Government • Federal Reserve

1. Henry Greville wrote: Kendall, one cannot help noticing your preference to post many fears about growing national debt and, so far, no hopeful advocacy of the vital importance of economic growth. August 26, 9:13 am | [comment link]

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