Interesting to note that after the Federal Reserve Bank was established in 1919, the crises have only gotten more severe... This is ironic given that the Fed was established to increase stability.
Not surprising though. It's a well known fact that debt/leverage increases volatility. What the Fed did is remove the limits which constrained the amount of debt in the system... For all we know, we could have been living an inefficient economic lie for 30 years and not realize it so long as new debts are taken out faster than the old ones are repaid... But what about when the borrowing slows down? Where will debtors find the liquidity if not from freshly injected credit? That's what's been happening over the past few decades. New borrowers monetizing the pyramid schemes of old borrowers... What happens when the economy runs out of suckers to enter at the bottom of the pyramid and the government is in perma-bailout mode. Zimbabwe rings a bell.
Not surprising though. It's a well known fact that debt/leverage increases volatility. What the Fed did is remove the limits which constrained the amount of debt in the system... For all we know, we could have been living an inefficient economic lie for 30 years and not realize it so long as new debts are taken out faster than the old ones are repaid... But what about when the borrowing slows down? Where will debtors find the liquidity if not from freshly injected credit? That's what's been happening over the past few decades. New borrowers monetizing the pyramid schemes of old borrowers... What happens when the economy runs out of suckers to enter at the bottom of the pyramid and the government is in perma-bailout mode. Zimbabwe rings a bell.