Suddenly normally calm economists are talking about 1931, the year everything fell apart.
It started with a banking crisis in a small European country (Austria). Austria tried to step in with a bank rescue — but the spiraling cost of the rescue put the government’s own solvency in doubt. Austria’s troubles shouldn’t have been big enough to have large effects on the world economy, but in practice they created a panic that spread around the world. Sound familiar?
The really crucial lesson of 1931, however, was about the dangers of policy abdication
The Fed is indeed abdicating its responsibility to the American public and instead continues to bailout the corrupt, failing TBTF banks. This isn’t so much abdication but rather quite deliberate policy. Send money to the 1% while ignoring the rest of us.
Worse, their policies are failing. The economy continues to do badly and unemployment is high. A responsible, non-compromised Federal Reserve would be actively trying to spur the economy. Krugman opines the Fed might be afraid to to anything that would be seem as helping Obama because that could enrage House Republicans. But that’s wishful thinking. The Fed has been pursuing the exact same policy of enriching the banksters at our expense since Day One of the Obama Administration. The problem isn’t one party but rather a corrupted system.