Can't the Fed just create money ( discounted emergency loan ) out of thin air in response to possible bank runs ?
Federal Reserve System - Wikipedia, the free encyclopedia Quote:
Lender of last resort
The Federal Reserve has the authority and financial resources to act as “lender of last resort” by extending credit to depository institutions or to other entities in unusual circumstances involving a national or regional emergency, where failure to obtain credit would have a severe adverse impact on the economy.
Through its discount and credit operations, Reserve Banks provide liquidity to banks to meet short-term needs stemming from seasonal fluctuations in deposits or unexpected withdrawals. Longer term liquidity may also be provided in exceptional circumstances. The rate the Fed charges banks for these loans is the discount rate (officially the primary credit rate).
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I guess nothing will stop Mr Ben from rescuing the banks, nothing ...
But will it be done at the expense of dollar and also merely inflating the bubble for a more damaging, painful and lasting future bust ? that's a big question mark ...
Quote:
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Ben Bernanke agreed that the Fed had made the Great Depression worse, saying in a 2002 speech: "I would like to say to Milton [Friedman] and Anna [J. Schwartz]: Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again.
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