Busted: Bankers and The Global Economy

March 3, 2008

Small Banks Likely to go Under

Filed under: banking, credit, federal reserve, money, politics — Tags: , , , , , , , , — digitaleconomy @ 11:14 am

The economy is not close to a 1970s-style mix of stagnant growth and high inflation, Federal Reserve Chairman Ben S. Bernanke said yesterday. He painted a sour outlook and cautioned that the downturn is likely to cause some small banks to go under. This is a blunt admission for Bernanke, the yes man. However, why would the fallout be limited to small banks with so many large banks in trouble?

At a recent news conference, President Bush said, “I don’t think we’re headed to a recession, but no question we’re in a slowdown.”

Are you confused yet? You would be listening to the likes of Bernanke and Bush. However, at the moment, Bernanke is closer to the truth.

In his second straight day of congressional testimony, Bernanke repeatedly made it clear that he believes the greatest risk facing the economy is slow growth, not high inflation. Unfortunately, the reality is that the United States has both limited or stalled growth and mild inflation. The mild inflation is caused by the excessive credit lines extended to the government as well as the continuous printing of money to “bolster the economy”. The stagnation is caused by outrageous energy prices and continued rising prices across the board. Whether you want to compare today to the 1970’s is another matter entirely. We have a few economic factors going on that don’t compare to the 1970’s.

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