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teomaxxx · 09-19-2007, 04:08 AM

http://www.telegraph.co.uk/money/mai.../bcnfed119.xml

History won't treat 'Bernanke put' kindly
By Tom Stevenson

Wall Street raised a 300-point cheer to Ben Bernanke after he unexpectedly slashed US interest rates by half a percentage point rather than the quarter-point cut most investors expected. History will not treat the "Bernanke put" so kindly.

Alan Greenspan, the Fed chairman's celebrated predecessor, spent 20 years putting off the day of reckoning by cutting the cost of money at the first whiff of trouble.

That increasingly discredited policy simply shifted America's bubbles from one part of the economy to another and will increase the size of the bill when it eventually comes to be paid.

Bernanke had the opportunity to signal a break with the past and he fluffed it. Fears that "Helicopter Ben" is just a chip off the old block look spot on.

There are two possible readings of the Fed's decision. Either there's something nasty in the woodwork that we haven't fully understood or Wall Street's cheap money addicts have simply been handed one more fix for their catastrophic habit.

The statement accompanying the first cut in four years underscored the confusion at the heart of the US's politically-driven monetary policy. The FOMC noted that inflation risks remain ? and we'll know more clearly today how serious the threat from rising prices is ? but in a pre-election year no one is prepared for the tough love required. This was Ben's first big test. He's blown it.

09-19-2007, 04:08 AM
teomaxxx Confirmed User Join Date: May 2003 Posts: 2,734	http://www.telegraph.co.uk/money/mai.../bcnfed119.xml History won't treat 'Bernanke put' kindly By Tom Stevenson Wall Street raised a 300-point cheer to Ben Bernanke after he unexpectedly slashed US interest rates by half a percentage point rather than the quarter-point cut most investors expected. History will not treat the "Bernanke put" so kindly. Alan Greenspan, the Fed chairman's celebrated predecessor, spent 20 years putting off the day of reckoning by cutting the cost of money at the first whiff of trouble. That increasingly discredited policy simply shifted America's bubbles from one part of the economy to another and will increase the size of the bill when it eventually comes to be paid. Bernanke had the opportunity to signal a break with the past and he fluffed it. Fears that "Helicopter Ben" is just a chip off the old block look spot on. There are two possible readings of the Fed's decision. Either there's something nasty in the woodwork that we haven't fully understood or Wall Street's cheap money addicts have simply been handed one more fix for their catastrophic habit. The statement accompanying the first cut in four years underscored the confusion at the heart of the US's politically-driven monetary policy. The FOMC noted that inflation risks remain ? and we'll know more clearly today how serious the threat from rising prices is ? but in a pre-election year no one is prepared for the tough love required. This was Ben's first big test. He's blown it.